PRICE  25  CENTS, 


II  FINANCES: 


Panics  and  Specie  Payments, 


Facts  Speak." 


PHILADELPHIA: 
JOHN  CAMPBELL  &  SON. 
1874. 


A.  C.  BRYSON  &  CO.,  PRINTERS,  607  CHESTNUT  STREET. 


lEx  ICtbrtB 


SEYMOUR  DURST 


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t 


THE  FINANCES: 

PANICS  AND  SPECIE-PAYMENTS. 


"Facts  speak" 


PHILADELPHIA  : 

JOHN  CAMPBELL  &  SON, 

740  SANSOM  ST, 

1874. 


Entered,  according  to  Act  of  Congress,  in  the  year  1874,  by 
J.  TV,  SCHUCKERS, 
In  the  Office  of  the  Librarian  of  Congress  at  Washington. 


HEARS  AND  DUSENBERY, 
STEREOTYPERS. 


A.   C.   BRYSON  AND  CO., 
PRINTERS. 


THE  WRITER'S  PREFACE. 


Some  few  pages  of  this  pamphlet  were  read  before  the 
Society  of  "  The  Monks"  at  Philadelphia  and — very  much 
enlarged — is  published  by  request  (not  of  "  The  Monks,"  how- 
ever, but  of  others),  with  which  I  comply  both  willingly  and 
with  reluctance. 

The  fundamental  and  dominating  problem  in  respect  of  a 
return  to  specie-payments  is  stated  at  page  60  and  again  at 
page  69.  It  is  included  in  the  question — At  what  volume  of 
eirculating  notes  can  the  banks  of  the  country  resume  anfl  sus- 
tain a  condition  of  specie-payments  ?  for  I  assume  that  the 
control  of  our  paper  issues  will  not  be  left  with  the  Treasury 
Department  after  resumption  is  effected.  That  we  can  support 
a  convertible  note  circulation  of  $354,000,000,  the  present 
authorized  issues  of  the  National  Banks,  is  overwhelmingly 
improbable.  No  commercial  nation  ever  has  done  it  and  at 
this  period  of  the  world's  experience  there  is  no  probability 
that  any  commercial  nation  can  do  it.  The  history  of  paper 
money  in  both  England  and  France  is  conclusive  upon  the 
point.  The  necessary  implication  is  that  we  must  contract  the 
circulation  to  the  whole  extent  of  the  legal  tender  issues  and 
of  the  fractional  currency — a  sum  equal  to  §420,000,000  ;  my 
own  judgment  being  (I  submit  it  with  diffidence  though  dog- 
matic in  my  conviction  upon  the  subject)  that  we  will  have  to 

(ui) 


iv 


Preface. 


contract  still  further  and  reduce  even  the  present  aggregate 
of  the  National  Bank  circulation  in  order  permanently  to  sus- 
tain specie-payments. 

What  the  consequences  of  so  tremendous  a  contraction  must 
be  reason  and  history  both  attest. 

The  attention  of  the  reader  is  called  to  the  note  on  page  28 
extracted  from  the  sixth  volume  of  Tooke's  invaluable  "  His- 
tory of  Prices."  It  is  important  in  connection  with  the  alle- 
gation thatsour  "  shocking  bad  currency"  is  peculiarly  provo- 
cative of  speculation,  fluctuation  and  panic.  Our  currency 
system  is  no  doubt  most  defective  in  many  particulars  and 
capable  of  great  improvements,  but  it  is  false  and  unfair  to 
charge  upon  it  evils  which  are  equally  chargeable  upon  a 
mixed  currency  or  an  exclusively  metallic  system  as  the  con- 
clusions of  the  Lords'  Committee  warrant  me  in  saying. 


THE  FINANCES. 


Those  who  have  watched  the  course  of  political 
events  through  a  long  course  of  years  cannot  fail  to 
have  observed  that  there  are  two  kinds  of  political 
issues :  the  false  and  the  true.  It  often  happens  that 
to  avoid  or  obscure  the  true  one  the  politicians  seek  to 
force  one  which  is  false.  An  instance  of  this  happened 
about  the  time  of  the  passage  of  the  Kansas-Nebraska 
Act,  when  an  effort  was  made  to  divert  public  atten- 
tion from  the  slavery  question  by  inciting  fictitious 
alarms  of  which  Knownothingism  was  the  fruit. 
Though  partially  successful  at  the  beginning  it  was  a 
disastrous  failure  at  the  end.  The  true  issue  asserted 
itself  despite  all  the  efforts  of  the  politicians  to  sup- 
press it.  The  alarm  about  a  "  third  term  "  seems  to 
partake  of  the  same  fictitious  nature :  for  it  was  and 
is  an  impossible  danger 

The  True  Issue. 
The  real  issues  are  two :  The  Finances  and  the 
pacification  of  the  South.  If  we  deal"  wisely  with  the 
first  the  second  will  settle  itself;  for  it  was  the  wise 
saying  of  a  profound  thinker  (and  I  beg  your  thought- 
ful attention  to  this)  that  the  welfare  and  progress  of 
the  Commonwealth  depend  more  upon  social  ameliora- 
tion than  upon  political  change.  If  we  can  revive  the 
industrial  activity  of  the  nation  we  may  rationally 


6 


The  Finances. 


hope  for  contentment  and  peace,  but  if  the  existing 
commercial  and  industrial  depression  is  to  be  much 
longer  continued  race-hostilities  will  surely  grow  in 
intensity  and  danger.  Nothing  is  more  certain  than 
that  social  and  political  disorders  are  the  inevitable 
fruits  of  industrial  inactivity. 

The  State  of  the  Country. 
A  multitude  of  workmen  are  idle  who  would  gladly 
work  if  they  could  find  work  to  do.  Some  are  wil- 
fully idle  of  course,  and  some  are  unwisely  so,  but  the 
vast  mass  of  those  unemployed  are  idle  upon  compul- 
sion. The  New  York  World  of  the  12th  of  Novem- 
ber said  seventy  thousand  people  were  out  of  work  in 
that  city,  and  there  are  probably  fifty  thousand  in 
Philadelphia.  One  hundred  and  twenty-five  thousand 
people  in  two  cities  without  labour  in  the  midst  of 
winter !  The  heart  shrinks  at  contemplation  of  the 
loss  and  suffering  and  physical  deterioration  which  this 
mere  statement  involves.  But  the  worst  is  not  told : 
in  every  city  and  village  of  the  country  and  among 
agriculturists  more  or  less  labour  is  idle ;  New  York 
and  Philadelphia  being  exaggerated  types  only  of  the 
condition  prevailing  everywhere  throughout  the  whole 
Republic.  Fifty  years  ago,  Lord  Brougham,  in  the 
course  of  a  debate  in  Parliament  on  the  repeal  of  the 
"Orders  in  Council  of  1812,"  speaking  of  the  Ameri- 
cans said — "  But  I  freely  acknowledge  that  the  sight 
of  one  part  of  America  brings  to  me  feelings  of  envy 
as  an  Englishman  :  I  mean  the  happy  distinction  that, 
over  the  whole  extent  of  that  boundless  Continent, 


The  Finances. 


7 


from  Canada  to  the  Gulf  of  Mexico  and  from  the 
Atlantic  Ocean  westward  to  the  Mississippi,  not  one 
pauper  is  to  be  found  /"  Alas  :  fifty  years  have  wrought 
a  dreadful  change  among  us,  for  poverty  keeps  steady 
pace  with  the  progress  of  wealth. 

The  Panic. 

But  we  all  know  the  cause  of  our  present  evils  and 
sufferings  ;  we  owe  them  to  the  sudden  and  calamitous 
panic  of  September  1873.  It  is  not  worth  while  to 
indulge  long  dissertations  upon  the  causes  of  the  finan- 
cial convulsions  called  "  panics what  the  people  ask 
is  relief  from  the  evils  and  distresses  the  panic 
entailed. 

Tlie  Importance  of  the  Finances. 

"  The  French  finances,"  writes  a  distinguished 
French  author,  "  connect  themselves,  on  all  sides,  with 
all  our  past  and  present  history ;  with  all  our  history, 
monarchical  and  republican,  political  and  religious, 
economic  and  social ;  with  all  our  victories  as  well  as 
all  our  disasters,  with  all  the  aspects  and  all  the  pro- 
gress of  our  administration,  with  all  the  conquests  of 
our  industry,  of  our  agriculture  and  our  commerce, 
with  all  the  achievements  of  our  art ;  in  a  word,  with 
all  the  epochs  which  have  made  famous  the  name  of 
France.  For  it  must  be  said,  and  said  whatever  men 
may  think  of  it,  that  the  finances  touch  everything,  help 
everything,  conclude  everything.  They  are  in  the  state 
what  blood  is  in  the  veins  of  the  human  body ;  if  it 
circulates,  it  carries  along  with  it  motion  and  life,  if  it 


8  The  Finances. 

stops  paralysis  and  death  supervene.  Good  organiza- 
tion, good  administration,  or  good  condition  of  the 
finances,  exert,  therefore,  imperiously  everywhere  and 
always,  a  positive,  healthful  and  vivifying  action" 
(mark  !  the  writer  from  whom  I  am  quoting  does  not 
say  influence,  but  Action  :)  "  upon  the  government  of  a 
country  and  the  prosperity  of  its  people." 

Yes !  on  every  side  the  finances  connect  themselves 
with  all  our  destiny,  public  and  private,  social  and 
political.  American  progress  has  been  advanced  or 
retarded  as  the  condition  of  the  finances  has  been 
sound  or  disordered.  We  have  found  it  so  both  in 
war  and  peace. 

Three  Great  Names. 

According  to  the  French  writer  from  whom  I 
have  just  quoted— there  are  in  the  history  of  France 
three  great  names,  Jacques  Coeur,  Colbert,  Napoleon  It, 
imperishably  connected  with  the  finances  at  different 
epochs ;  so  thi^ee  great  names,  as  immortal  as  the  his- 
tory of  our  own  country,  connect  themselves  with 
American  financial  administration — they  are  those  of 
Robert  Morris,  Alexander  Hamilton,  and  Salmon 
Portland  Chase.  Each  of  these  has  in  his  turn,  ren- 
dered illustrious  services. 

But  this  is  a  digression. 

The  Remedy  for  the  Pan  ic. 

At  the  beginning,  the  remedy  for  the  panic  was 
simple  and  obvious,  and  the  public  opinion  of  the 
country  unmistakably  pointed  to  its  exercise.  That 
remedy  was  A  temporary  enlargement  of  the  cur- 


The  Finances.  9 

rency,  and  was  warranted  not  only  by  public  opinion, 
but  also  by  ample  experience  both  in  Europe  and 
America.  The  government  declined  to  adopt  it, 
partly  because  of  the  clamour  against  "  inflation,"  but 
chiefly  upon  the  ground  that  such  an  enlargement 
would  be  a  violation  of  law.  A  truly  great  statesman, 
recognising  the  necessity,  would  have  taken  the  re- 
sponsibility of  the  violation — if  any  was  involved — and 
trusted  to  the  justice  of  his  countrymen  for  a  vindica- 
tion of  his  act.  But  the  Federal  Government  was  not 
in  the  hands  of  a  statesman  at  that  critical  time,  and 
the  counsels  of  bankers  and  politicians  were  preferred 
to  the  lessons  of  experience  and  a  pronounced  public 
sentiment.  The  effects  of  this  policy  of  ^masterly 
inactivity  were  easily  predicted.  They  involved  all 
the  social  evils  we  now  suffer,  and  the  retirement  of 
the  Republican  party  from  the  control  of  the  govern- 
ment. In  two  or  three  private  letters  to  the  Comp- 
troller of  the  Currency — written  in  the  sorest  pressure 
of  the  panic — I  ventured  to  warn  that  gentleman  of 
the  political  consequences  sure  to  result  if  General 
Grant's  administration  should  adopt  the  policy  of  in- 
action. General  Grant's  administration  did  adopt  the 
policy  of  inaction,  and  the  country  justly  holds  the 
party  of  which  he  is  the  recognised  head  responsible 
for  his  acts. 

An  Unforeseen  Consequence. 

Yes,  the  remedy  at  the  beginning  was  simple  and 
obvious,  and  would  have  been  supported  by  the  suf- 
frages of  the  people.  The  temporary  expansion  ne- 
cessary to  allay  the  panic  might  easily  have  been 


10 


The  Finances. 


retired,  immediately  upon  the  restoration  of  confi- 
dence, without  difficulty  or  disturbance,  and  without 
action  by  Congress ;  but  the  remedy  being  rejected, 
the  panic  took  its  course  and  soon  reacted  upon 
the  Federal  treasury.  The  revenues  declined,  and 
by  the  time  of  the  meeting  of  Congress,  the  Treasury 
Department  was  unable  to  meet  current  demands. 
It  was  the  labouring  ox  that  had  been  gored  in  Sep- 
tember ;  the  Federal  bull  felt  the  wound  in  December ; 
and,  presto !  that  which  had  been  declared  illegal 
when  the  motive  was  relief  to  the  labour  of  the  coun- 
try, became  quite  lawful  when  the  motive  was  office- 
holders' salaries!  The  "  reserve"  was  drawn  upon 
without  scruple,  and  $26,000,000  of  "  unconstitu- 
tional" legal  tenders  were  floated  into  the  circulation. 
One-half  this  sum,  judiciously  used  at  the  proper  timey 
would  have  saved  the  needless  and  long-protracted  and 
aggravated  suffering  of  the  past  year;  but  emitted  at 
the  time  it  was,  and  under  the  existing  circumstances 
of  the  country,  it  exerted  no  stimulating  effect  upon 
trade.  The  real  effect  of  it  was  to  add  $26,000,000 
to  the  currency ;  for,  after  a  great  deal  of  wrangling 
in  Congress,  this  worse  than  useless  expansion  was 
made  a  permanent  part  of  the  circulation.  Here  was 
an  unforeseen  consequence  to  the  statesmanship  of  the 
panic,  but  it  was  perfectly  natural  and  scarcely  avoid- 
able, and  among  the  wise  might  serve  to  point  a  moral. 

The  Remedy  for  Panics. 

I  repeat  that  the  remedy  for  the  panic,  at  the 
beginning,  was  not  only  obvious,  but  was  warranted 
by  a  pronounced  public  sentiment  and  by  ample  ex- 


The  Finances. 


11 


perience  both  at  home  and  abroad.  If  financial  ex- 
perience has  proved  anything,  indeed,  it  is  the  absolute 
truth  of  this  proposition.  The  historical  proof  is  fa- 
miliar to  students  of  monetary  science ;  nevertheless, 
I  choose  to  reproduce  here  brief  sketches  of  English 
panics  before  and  since  resumption  of  cash-payments 
by  the  Bank  of  England  in  1821. 

"In  1792,"  says  Mr.  R.  H.  Patterson,1  "trade 
had  been  unusually  if  not  excessively  brisk ;  and, 
at  the  same  time,  as  the  year  progressed  political 
agitation  assumed  formidable  proportions.  Acts  of  riot 
and  insurrection  took  place,  and  when  war  with  France 
was  declared  at  the  end  of  the  year,  the  public  dis- 
quiet amounted  almost  to  panic.  Bankruptcies  had 
doubled  in  number,  and  the  declaration  of  war  gave 
a  shock  to  credit  which  was  already  staggering.  On 
the  15th  of  February,  1793,  a  house  of  considerable 
magnitude  foiled,  and  on  the  19th  the  Bank  of  England 
refused  the  paper  of  Lane  &  Company,  who  stopped 
next  morning  with  liabilities  to  the  amount  of  nearly 
a  million  sterling  ($5,000,000).  In  the  meantime  the 
panic  spread  to  the  bankers.  The  run  commenced  on 
the  banks  of  Newcastle,  which  were  perfectly  solvent, 
but  which,  in  consequence  of  the  run  upon  them,  were 
obliged  to  stop  payment.  The  panic  immediately 
spread  throughout  the  country.  In  the  west  of  Scot- 
land, also,  there  was  the  greatest  distress  from  the  total 
destruction  of  credit,  which  calamity  was  produced  by 
the  refusal  of  the  Glasgow,  Paisley  and  Greenock  banks 
to  discount.  The  pressure  extended  also  to  the  London 
banks.    The  extraordinary  state  of  credit  (to  speak 


1  ik  Economy  of  Capital,"  p.  88. 


12 


The  Finances. 


correctly,  the  total  collapse  of  credit)  had  obliged  every 
person  connected  with  trade  and  money  transactions 
to  gather  in  and  husband  every  resource  to  meet  all 
demands, — thereby,  of  course,  greatly  lessening  the 
ordinary  circulation.  In  these  circumstances,  the  Gov- 
eminent  urged  the  Bank  (of  England)  to  come  for- 
ward and  support  credit,  but  the  Bank  resolutely  de- 
clined. When  the  Bank  adopted  this  perverse  course, 
universal  failure  seemed  imminent.  The  Government, 
however,  with  Pitt  at  its  head,  wisely  took  the  matter 
into  its  own  hands  ;  and,  acting  upon  the  advice  of 
Sir  John  Sinclair,  made  an  issue  of  Exchequer  bills, 
which  acted  like  magic  in  sustaining  credit  and  at 
once  put  an  end  to  the  crisis.  The  amount  authorized 
to  be  issued  was  5,000,000/.  in  sums  of  100/.,  50/.  and 
20/.,  but  not  half  of  that  amount  (only  2,202,000/.) 
was  needed,  and  the  whole  of  this^sum  was  repaid. 

"  The  panic  of  1797  was  produced  entirely  by  politi- 
cal causes.  There  had  been  no  overtrading  of  any 
kind.  In  December  '96  took  place  the  French  expe- 
dition under  Hoche  for  the  invasion  of  Ireland,  and 
in  the  February  following  a  French  frigate  landed 
twelve  hundred  men  on  the  Welsh  coast  At  this 
time  the  Banks  at  Newcastle  had  a  more  than  ordinary 
demand  upon  them  for  cash,  because,  in  addition  to 
the  manufactories  and  collieries,  the  number  of  troops 
stationed  in  that  part  of  the  country  had  been  con- 
siderably augmented.  The  banks  had  imported  an 
extra  amount  of  cash  to  meet  their  expenses,  and 
were  negotiating  for  more  when  the  panic  broke  upon 
them  and  compelled  them  to  stop.  The  news  of  the 
stoppage  of  the  Newcastle  banks  spread  like  wild-fire 


The  Finances. 


13 


throughout  the  country  and  soon  reached  the  Metrop- 
olis. The  drain  upon  the  Bank  of  England  now  be- 
came a  run,  till  on  the  25th  of  February  the  specie 
was  reduced  to  1,272,000?.  Before  this,  the  directors 
of  the  Bank,  in  a  state  of  utter  bewilderment  at  the 
circumstances  of  the  country,  had  used  the  most  vio- 
lent efforts  to  contract  their  issues.  In  five  weeks 
they  had  reduced  them  by  nearly  2,000,000/.  But 
even  this  gave  no  true  idea  of  the  curtailment  of  mer- 
cantile accommodation,  for  the  private  bankers  were 
obliged,  for  their  own  security,  to  follow  the  ex- 
ample of  the  Bank.  Next  day  (Sunday)  to  prevent 
the  total  stoppage  of  the  Bank,  an  Order  in  Council 
was  issued  authorizing  it  to  suspend  cash  payments. 
The  relief  produced  on  the  instant  by  the  definite  de- 
termination to  suspend  cash  payments  and  the  issues 
of  paper  was  very  great :  within  one  week  the  Bank 
had  increased  its  accommodation  by  nearly  2,000,000/. 
sterling.  The  notes  were  taken  as  readily  by  every 
one  when  it  was  known  there  was  no  gold  to  cash  them 
as  when  the  Bank  was  abundantly  supplied  with 
specie."  1 

Announcement  of  the  suspension  of  specie  payments 
was  made  on  Monday  the  26th  of  February,  and  so 
far  as  the  convertibility  of  its  notes  was  concerned,  the 
Bank  remained  in  a  state  of  suspension  until  May 
1821,  a  period  substantially  of  twenty-five  years. 
There  was  of  course  more  or  less  financial  disturbance 


1  From  R.  H.  Patterson's  "  Economy  of  Capital/'  pp.  88,  et  seq. 
Mr.  Patterson  quotes  largely,  however,  from  Mr.  H.  D.  MacLeod's 
"  Theory  and  Practice  of  Banking,"  a  book  of  great  interest  and  value, 
in  which  the  reader  will  find  a  vast  amount  of  information. 


14 


The  Finances. 


during  this  long  interval,  partly  because  of  the  vary- 
ing fortunes  of  war  and  partly  from  other  causes,  and 
bank-notes  depreciated,  although  the  friends  of  the 
paper-money  system  alleged  that  the  price  of  bullion 
had  risen,  because  of  government  demand  for  its  use  in 
foreign  countries,  which  had  drained  the  kingdom  of 
almost  its  whole  supply.  At  one  time  the  difference 
between  coin  and  bank-notes  was  as  great  as  40  per 
cent.  A  fierce  controversy  arose  between  the  bullion- 
ists  and  the  paper-money  advocates,  which  is  not  ended 
even  yet.  In  1810  the  famous  Bullion  Committee  was 
appointed,  the  general  purpose  of  which  was  an  inquiry 
into  the  currency  and  foreign  exchanges.  This  Com- 
mittee examined  a  great  number  of  witnesses — bank 
directors,  private  bankers,  merchants,  and  others — 
and  it  is  not  a  little  remarkable  that  the  larger  num- 
ber of  them,  and  they  were  all  practical  men,  opposed 
the  allegation  that  bank-notes  were  depreciated.  It  is 
my  purpose,  however,  to  refer  (in  this  place)  to  one 
of  its  conclusions  only,  which  was,  that  when  a  great 
and  sudden  failure  of  confidence  occurred,  a  judicious 
increase  of  accommodation — in  other  words,  an  ex- 
pansion of  THE  CURRENCY — was  the  proper  remedy. 

In  1819,  in  order  to  put  the  currency  question  "  at 
rest  forever,"  as  a  distinguished  bullionist  alleged,  the 
Bank  was  required  by  Act  of  Parliament  to  resume 
payment  of  its  notes  in  standard  coin  by  a  specified 
date  in  1823.  This  act  was  passed  without  a  dissent- 
ing voice,  an  unbelieving  member  of  the  House  of 
Commons  being  induced  to  withdraw,  it  is  said,  in 
order  that  the  affirmative  vote  might  be  unanimous. 
The  exultation  of  the  friends  of  the  measure  was  ex- 


The  Finances. 


15 


«cessive,  and  they  predicted  with  a  boundless  confidence 
that  its  adoption  would  put  an  end  to  all  financial  dis- 
orders and  embarrassments,  and  inaugurate  the  era  of 
lasting  and  universal  prosperity. 

The  Bank  was  able  to  anticipate  the  time  fixed  by 
the  Act  of  Parliament,  and  actual  resumption  took 
place  in  1821,  under  what  circumstances  and  with 
what  immediately  attending  disasters,  I  shall  detail 
hereafter.  , 

But  the  act  which  was  to  set  the  "  currency  ques- 
tion at  rest  forever,"  utterly  failed  of  its  object,  for 
within  three  years — that  is  in  1825 — occurred  one  of 
the  most  destructive  financial  convulsions  known  to 
English  history.    It  is  commonly  called  the  panic. 

In  February  of  that  year  (1825),  the  King  congrat- 
ulated his  people  upon  their  prosperity,  and  a  distin- 
guished member  of  his  Council  declared  that  "  the 
country  was  reaping  in  honour  and  repose  all  that  had 
been  sown  in  courage,  constancy  and  wisdom." 

At  the  time  of  these  utterances  the  bullion  in  the 
Bank  of  England  amounted  to  nearly  fifty  millions  of 
dollars,  and  its  notes  circulating  among  the  people  ag- 
gregated about  one  hundred  millions.  The  bullion  of 
the  Bank,  however,  was  steadily  diminishing  (and  had 
been  during  the  whole  of  the  year  1824),  to  meet  de- 
mands for  export;  but  instead  of  reducing  its  emissions 
the  Bank  enlarged  them,  and  persisted  in  this  until 
May,  when  it  suddenly  reversed  its  policy  and  began 
a  course  of  contraction.  This  did  not  stop  the  drain 
of  bullion,  but  rather  accelerated  it,  and  by  the  end 
of  October  the  whole  stock  in  possession  of  the  Bank 
was  reduced  to  a  sum  very  slightly  over  fifteen  millions 


16 


The  Finances. 


of  dollars.  The  pressure  was  now  extreme,  and  every 
hour  added  to  its  severity.  On  the  29th  of  November 
announcement  was  made  of  the  failure  of  two  great 
banking  establishments  in  the  country,  and  by  the  3d 
of  December  (Saturday)  the  panic  had  fairly  set  in, 
and  all  London  was  thrown  into  the  most  violent 
alarm  and  consternation.  Sunday  intervened,  and  hopes 
were  entertained  that  on  Monday  a  better  feeling  would 
prevail,  but  Monday  came  without  abatement  of  the 
terror  of  Saturday.  The  excitement  was  wilder  than 
ever,  and  under  its  influence  the  great  city  house  of 
Sir  Peter  Pole  &  Co.  stopped.  The  announcement  of 
this  event  was  followed  by  a  run  upon  all  the  London 
bankers,  and  several  gave  way.  The  Bank  of  England 
was  ^itself  upon  the  very  verge  of  suspension,  for  at 
the  end  of  the  week, — that  is  on  the  10th  of  Decem- 
ber,— the  bullion  in  its  vaults  was  reduced  to  ten  mil- 
lions of  dollars,  and  by  the  following  Wednesday  to  a 
sum  little  more  than  six  millions,  with  a  continuing 
demand.  During  Monday  and  Tuesday  of  that  me- 
morable and  most  disastrous  week  (as  was  afterward 
said  in  the  House  of  Commons),  it  was  impossible  to 
convert  into  money  to  any  extent  the  best  securities 
of  the  government.  Sales  could  not  be  made  of 
Exchequer  bills,  nor  of  Bank  or  East  India  stock, 
nor  of  the  public  funds :  men  would  not  part  with 
ready  money  upon  any  terms  nor  for  any  security. 
Before  the  crisis  ended,  sixty-three  country  banks  sus- 
pended, and  many  mercantile  houses  of  entire  solvency 
succumbed  to  the  pressure. 

By  what  means  was  this  devastating  financial  storm 
arrested  ?    They  were  very  simple. 


The  Finances. 


17 


The  crisis  was  at  its  height  from  Monday  the  12th 
to  Saturday  the  17th  of  December.  Up  to  the  night 
of  Wednesday  the  Bank  of  England  had  restricted  its 
issues  :  but  at  that  time,  becoming  sensible  of  its  error 
and  resolved  to  make  common  cause  with  the  country, 
the  Bank  reversed  its  policy,  and  between  Wednesday 
and  Saturday  issued  circulating  notes  to  an  amount 
exceeding  825,000,000!  "This  audacious  policy 
says  Mr.  MacLeod,  "  was  crowned  with  the  most  com- 
plete success  :  the  panic  was  stayed  almost  immediately. 
....  All  contemporary  evidence  proves  that  it  was 
this  profuse  issue  of  5,000,000/.  of  paper  in  a  few  days 
that  stayed  the  panic.  If  the  Bank  had  persevered 
in  the  restrictive  policy  three  days  longer,  the  total 
and  entire  destruction  of  commercial  credit  would  in- 
fallibly have  ensued." 

This  is,  in  brief,  the  history  of  the  great  and  terrible 
convulsion  of  1825.  It  happened  under  a  specie-pay- 
ing system,  and  within  three  years  of  that  memorable 
enactment  of  the  British  Parliament  which  was  to 
44  restore  soundness  and  stability  to  the  circulation"  and 
make  panics  impossible.  The  efficacy  of  the  remedy 
adopted  was  most  astonishing  :  the  panic  was  not  only 
allayed,  but  banking  and  commercial  credit  was  im- 
mediately restored,  trade  was  revived,  and  a  needless 
and  protracted  period  of  suffering  was  averted.  * 

Similar  but  less  disastrous  panics  happened  in  1836 
and  in  1839,  and  from  the  latter  year  to  the  end  of 
the  year  1843,  a  general  commercial  stagnation  pre- 
vailed throughout  all  England,  accompanied  by  a  cor- 
responding degree  of  suffering  among  the  labouring 
population.    The  calamities  the  country  had  undergone 


18 


The  Finances. 


in  1825,  1835-6  and  1839,  and  the  long-continued 
distress  from  1839  to  the  end  of  the  year  1843,  were 
commonly  attributed  to  the  power  of  the  bank  to  over- 
issue notes,  notwithstanding  the  obligation  to  redeem 
in  coin.  To  prevent  overissue,  and  in  order  that 
the  paper  circulation  should  at  no  time  be  greater  in 
amount  than  the  circulation  would  be  if  it  were  composed 
exclusively  of  coin,  Sir  Robert  Peel  proposed,  in  1844, 
a  restriction  upon  the  power  of  the  Bank  to  issue 
notes,  by  separating  it  into  two  departments,  respect- 
ively of  issue  and  banking,  with  distinct  offices  for 
each  and  different  systems  of  accounts.  The  issue 
department  was  to  be  allowed  to  emit  14,000,000/. 
notes  upon  government  securities,  and  any  amount  in 
excess  of  14,000,000/.  if  represented  pound  for  pound 
by  bullion  actually  in  the  vaults  of  the  Bank;  although 
all  the  notes  of  the  Bank,  whether  issued  upon  the 
foundation  of  public  securities  or  against  bullion,  were 
to  be  payable  in  coin  upon  demand.  The  plan  was 
adopted,  and  there  was  a  wide  concurrence  in  the  be- 
lief that  its  effect  would  be  to  prevent  overissues, 
speculation,  and  recurring  panics.  The  plan  was  cer- 
tainly as  near  an  approximation  to  a  "  perfect  paper- 
money  system,"  as  human  ingenuity  was  likely  to 
devise ;  but  its  projectors  and  advocates  forgot  that  the 
vast  credit  system  which  is  at  once  the  glory  and  mis- 
fortune of  our  modern  civilization  and  the  source  of  all 
speculation  and  panic,  will  prevail  as  widely  under  a 
metallic  currency  as  under  one  purely  of  paper.  The 
proof  was  not  far  distant. 

"The  next  great  crisis,"  says  Mr.  Patterson,1  "was 

1  "Economy  of  Capital,"  p.  103,  et  seq. 


The  Finances. 


19 


that  of  1847 ;  previous  to  which,  by  the  Act  of  1844, 
all  liberty  of  action  had  been  taken  from  the  Bank  in 
regard  to  its  issues  of  notes,  which  were  made  entirely 
dependent  upon  the  amount  of  specie  in  its  possession. 
The  extreme  pressure  in  this  crisis  began  on  the  23d 
of  September,  when  the  Bank  adopted  more  stringent 
measures  for  curtailing  the  demand  upon  its  resources. 
On  the  15th  of  October  it  refused  to  make  advances 
either  on  government  stock  or  on  Exchequer  bills  :  the 
consequence  of  which  was  that  the  other  banks  has- 
tened to  sell  their  public  securities,  and  for  their  own 
safety  hoarded  the  notes  received  in  payment — thus 
still  further  reducing  the  circulation.    What  they 
could  not  get  from  the  Bank  in  advances  on  their  se- 
curities, they  got  by  the  sale  of  them  ;  so  that  the 
only  effect  of  the  Bank's  restrictive  policy  was  to  create 
panic  and  hoarding,  which  immensely  increased  the 
difficulties  of  its  position.    Everything  became  worse 
day  by  day.    Several  large  banks  stopped  payment  in 
Liverpool,  Manchester,  Newcastle  and  other  towns, 
and  the  drain  upon  the  Bank  of  England  became 
greater  than  ever.    As  the  whole  commercial  world 
knew  that  the  resources  of  its  banking  department 
were  being  rapidly  exhausted,  a  complete  panic  seized 
upon  it.    A  cessation  of  private  discounts  took  place. 
No  one  would  part  with  money  or  notes  in  his  posses- 
sion.   On  the  23d  of  October  the  terrible  game  was 
played  out,    The  Bank  Act  had  to  be  suspended,  and 
the  Queens  government,  with  a  view  to  restore  confi- 
dence to  the  mercantile  community,  recommended  the 
Bank  directors  to  enlarge  the  amount  of  their  discounts 
and  advances  (that  is,  to  expand  the  currency!)  What 


20 


The  Finances. 


followed?  The  government  letter  was  made  public 
about  one  o'clock  on  Monday  the  25th,  and  no  sooner 
was  this  done  than  the  panic  vanished  like  a  dream. 
Mr.  Gurney  stated  that  it  produced  its  effects  in  ten 
minutes !  No  sooner  was  it  known  that  notes  might 
be  had'  than  the  want  of  them  ceased."  The  whole 
amount  of  notes  issued  was  under  400,000Z. 

"  The  crisis  of  1847  was  the  most  severe  which  had 
occurred,  but  it  was  surpassed  in  disaster  by  that  which 
followed  ten  years  after.  In  1857  a  wave  from  the 
American  crisis  crossed  the  Atlantic,  and  produced  an 
equal  crisis  in  our  own  Islands."  After  describing  the 
causes  of  this  panic,  Mr.  Patterson  proceeds:  "No 
crisis  was  ever  so  unexpected ;  none  ever  culminated 
so  rapidly  or  proved  so  destructive.  Credit  was  shaken, 
and  a  run  commenced  upon  several  banks  which  were 
known  or  supposed  to  be  connected  with  the  suspended 
firms.  The  Liverpool  Borough  Bank,  closely  con- 
nected with  the  American  trade,  stopped  payment. 
Denniston  &  Co.,  likewise  closely  connected  with  the 
American  trade,  had  also  to  suspend,  with  liabilities  to 
the  amount  of  2,143,701/. ;  and  after  reeling  for  some 
time  under  the  run  made  upon  it,  the  Western  Bant 
of  Scotland  likewise  closed  its  doors.  Great  exertion; 
were  made  in  Glasgow  by  the  authorities  and  leading 
merchants  to  arrest  the  panic :  the  other  Scotch 
banks,  alarmed  at  the  aspect  of  affairs,  and  urged 
thereto  by  the  community,  at  length  came  forward  to 
check  the  distrust,  and  gave  their  united  and  most 
energetic  support  to  some  of  their  number  which  were 
run  upon.  Thursday  the  12th  was  the  last  day  of  the 
panic  in  Scotland. 


The  Finances. 


21 


"  Meanwhile  the  crisis  had  spread  to  London.  The 
Bank  had  raised  its  rate  rapidly  from  5  to  10  per  cent. ; 
and  as  all  the  discount  houses  in  London  ceased  to 
make  advances,  the  accommodation  given  (or  which 
under  the  act  could  be  given)  by  the  Bank,  was  totally 
inadequate.  The  more  tight  the  money  market  be- 
came, the  faster  were  gold  and  notes  withdrawn  from 
the  Bank.  Every  bank  or  firm  sold  its  securities,  and 
kept  beside  it  the  gold  or  notes  thus  obtained.  In 
order  to  meet  the  run  upon  them,  the  Scotch  banks 
had  ordered  about  1,000,000?.  sterling  in  sovereigns 
from  London — which  they  obtained  by  selling  a  por- 
tion of  their  government  stock  (which,  being  readily 
convertible,  they  always  hold  in  reserve  for  such 
emergencies),  and  thereafter  getting  the  notes  received 
in  payment  cashed  at  the  Bank  of  England.  The 
English  and  Irish  banks  took  similar  precautions ;  and 
altogether,  in  consequence  of  the  panic,  the  banks 
found  it  necessary  to  keep  about  them  three  millions 
more  than  their  ordinary  amount  of  specie.  On  Wed- 
nesday, the  11th,  the  great  discount  house  of  Sander- 
son &  Co.  was  forced  to  suspend,  with  liabilities  to  the 
amount  of  5,29 8,9 90Z.  sterling.  The  great  American 
firm  of  Peabody  &  Co.  also  was  known  to  be  in  extre- 
mis. It  was  perfectly  solvent,  but,  like  other  firms,  it 
had  for  the  time  to  lie  out  of  its  money,  and  thus  was 
unable  to  meet  its  engagements.  It  was  of  the  utmost 
importance  to  support  this  firm,  as  it  was  known  that 
its  fall  would  bring  down  many  others,  and  establish 
a  general  panic  in  London.  Peabody  &  Co.  required 
assistance  to  the  extent  of  800,000/. ;  but  the  Bank, 
fettered  by  the  Act  of  1844,  had  not  this  sum  to  ad- 


22 


The  Finances. 


vance.  But  no  sooner  was  the  act  suspended  (on  the 
afternoon  of  the  12th),  than  the  Bank"  was  enabled 
to  extend  its  issues;  "the  required  sum  was  advanced 
to  Peabody  &  Co.,  and  in  like  manner  aid  was  ex- 
tended to  many  other  firms,  and  to  some  English 
banks.  In  London,  Liverpool,  Manchester,  Birming- 
ham, indeed,  all  over  the  country,  as  every  one  will 
remember  and  as  is  proved  by  the  trade-reports  now 
lying  before  us,  the  beneficial  effect  produced  by  the 
suspension  of  the  act,  and  the  resolution  of  the  Bank  to 
extend  its  issues,  was  instantaneous.' ,l 

"This  authorization,"  says  Mr.  Gilbart,2  "which 
was  given  on  the  12th,  at  once  quieted  the  public 
mind ;  but  there  was  this  notable  difference  between 
the  effects  of  the  first  suspension  of  the  Act  in  1847 
and  of  the  present,  that  whereas  in  that  year  the  mere 
notice  of  suspension  had  operated  as  a  charm,  and 
notes  to  the  amount  of  only  400,000/.  were  actually 
issued  in  excess  of  the  statutory  limit,  in  1857  the 
Bank  issued,  from  November  13th  to  the  end  of  the 

1 "  The  number  of  solvent,  indeed  very  wealthy  firms/'  says  Mr. 
Patterson,  "  which  had  to  suspend  during  this  crisis  was  remarkably 
great  ;  and  the  fact  throws  an  important  light  upon  the  character  of 
such  crises,  and  upon  the  best  means  of  averting  them.  The  suspension 
of  Denriiston  &  Co.,  for  example,  which  was  one  of  the  first  houses  to 
give  way,  was  so  entirely  artificial,  that,  after  providing  for  every  shil- 
ling of  their  liabilities,  the  accountant  of  the  estate  declared  them  pos- 
sessed of  a  surplus  of  nearly  three-quarters  of  a  million.  The  suspen- 
sion of  Naylor,  Vickers  &  Co.  was  of  a  similar  character  :  the  firm  hav- 
ing assets  to  discharge  all  their  debts  with  a  balance  in  their  favor  of 
280,000/.  Sanderson  &  Co.,  with  liabilities  to  the  enormous  amount  of 
f>,2(J<S,000Z.,  paid  in  full  and  resumed  business  ;  and  a  large  portion  of 
the  other  suspended  firms  were  proved  in  like  manner  to  be  perfectly 
solvent." 

'2U  The  Principles  and  Practice  of  Banking,,;  p.  281. 


The  Finances. 


23 


month,  no  less  than  6,776,000?.  of  notes  beyond  the 
limit  (14,475,000/.  ;  now  raised  to  15,000,000?.)  tixed 
by  the  act." 

The  panic  of  1866  still  further  illustrates  the  princi- 
ple under  consideration.  The  difficulties  which  brought 
on  the  great  convulsion  of  May  1866  began  in  Jan- 
uary; in  February  the  failure  of  the  "  Joint  Stock 
Discount  Company  created  a  general  alarm,  for  the 
reason,"  says  Mr.  Henry  Durning  MacLeod,  "  that 
the  doings  of  this  company  were  merely  a  type  of  a 
large  amount  of  business  which  was  known  to  have 
been  engaged  in  by  numerous  other  companies.  In 
March,  Barned's  Bank  at  Liverpool  stopped  payment, 
with  liabilities  of  upwards  of  three  and  a  half  millions, 
Several  great  railway  contractors  also  suspended,  in- 
volving in  discredit  the  companies  with  whom  they 
were  known  to  have  financed. 

"  On  the  3d  of  May  the  Bank  of  England  raised 
its  discount  to  seven  per  cent.  Every  one  now  felt 
that  the  long-dreaded  crisis  was  at  last  come.  The 
air  was  thick  with  rumours,  and  it  was  now  known  that 
it  was  merely  a  question  of  weeks,  perhaps  of  days, 
when  the  storm  should  burst.  On  the  8th  of  May  the 
rate  was  raised  to  eight  per  cent  On  the  after- 
noon of  Thursday,  May  10th,  the  terrible  news  spread 
through  London  that  the  great  establishment  of  Over- 
end,  Gurney  &  Co.  had  stopped  payment,  with  liabili- 
ties exceeding  10,000,000?.  It  was  the  most  stupen- 
dous failure  that  ever  took  place  in  the  city.  The 
news  was  spread  after  banking  hours,  but  every  one 
could  foresee  what  the  effect  would  be  next  morning. 
The  Chancellor  of  the  Exchequer  said  the  next  evening 


24 


The  Finances. 


in  the  House  of  Commons  that  the  excitement  was 
without  a  parallel."  The  morning  papers  of  Friday, 
the  11th,  contained  an  announcement  of  the  stoppage, 
which  created  a  prodigious  excitement.  "  The  11th 
of  May,"  said  the  distinguished  French  economist,  M. 
Wolowski,  "  will  be  long  remembered  in  London :  it 
was  a  day  of  distress  and  terror,  and  seemed  to  be  the 
signal  of  a  general  ruin.  No  one  was  sure  of  any  one 
else,  nor  even  of  himself,  the  moment  it  became  known 
that  the  great  house  had  closed  its  doors.  It  was  by 
hundreds  of  millions  that  the  engagements  of  that 
gigantic  financial  firm,  whose  fall  made  the  very  ground 
tremble,  were  counted.  The  settlement  of  a  great 
portion  of  the  commerce  of  the  world  is  concen- 
trated* in  England ;  the  settlement  of  the  commerce 
of  England  wTas  concentrated  in  London,  and  the 
house  of  Overend,  Gurney  &  Co.  held  one  of  the  fore- 
most places  among  the  small  number  of  establish- 
ments in  whose  houses  is  the  settlement  of  the  com- 
merce of  the  city.  For  a  long  time  it  enjoyed  im- 
mense credit ;  it  disposed  of  enormous  securities ;  a 
renown  more  than  European  had  multiplied  the  number 
of  its  customers  and  augmented  the  amount  of  deposits 
confided  to  it.  Thus,  the  fatal  Friday  which  witnessed 
the  disaster  continues  to  be  popularly  known  as  6  Over- 
end  Friday.'" 

On  the  evening  of  that  "  Black  Friday  "  announce- 
ment was  made  that  the  Ministry,  following  the  prece- 
dents of  1847  and  1857,  had  informed  the  Bank  that 
if  they  thought  proper  to  make  advances  beyond  the 
limit  fixed  in  1844,  the  government  would  bring  in  a 
Bill  of  Indemnity.    "  This  announcement,"  says  Mr. 


The  Finances. 


25 


MacLeod,  "  produced  next  morning  the  best  effects. 
The  Bank  raised  its  rate  to  10  per  cent.,  but  every- 
thing was  calmed  down,  and  though  subsequent  to  this 
some  other  stoppages  took  place,  yet  the  knowledge 
that  the  Bank  had  power  to  make  advances  on  good 
securities,  abated  the  panic."  "  The  third  announce- 
ment of  the  suspension  of  the  Bank  Act,"  says  Mr. 
Gilbart,  "  operated,  for  the  third  time,  like  a  charm ;" 
and  in  the  course  of  five  days  the  Bank  of  England 
made  advances  to  the  amount  of  over  1 2,000, 000Z. ! 

Our  domestic  experience  has  not  been  so  pronounced 
and  decisive  as  that  of  Great  Britain;  but  in  1863, 
Mr.  Cisco,  Assistant  Treasurer  at  New  York,  with  the 
concurrence  of  Mr.  Chase,  extended  relief,  with  most 
beneficial  results,  to  the  banks  of  that  city  at  a  very 
critical  time;  and  notably  in  1866,  but  also  upon  other 
occasions,  Mr.  McCulloch  exercised  the  powers  of  his 
office  as  Secretary  of  the  Treasury,  as  is  well  known,  to 
avert  monetary  disasters.  These  instances,  however, 
are  not  less  illustrative,  in  kind  and  degree,  of  the 
efficacy  of  the  principle  of  enlarged  issues  to  fill  the 
void  in  the  circulation  always  attendant  upon  panic 
than  those  of  England. 

Hard-Money  and  Panics. 
But  we  may  learn  another  lesson  from  the  experi- 
ences just  recited,  and  it  is  this  :  That  panics  are  not 
peculiar  to  our  paper-money  system,  as  has  been  al- 
leged by  uncandid  bullionists,  any  more  than  they  are 
peculiar  to  a  hard-money  system.1    So  long  as  ninety- 


1  Mr.  Gilbart  says  :  "  Although  it  be  true  that  each  monetary  crisis 
is  in  large  part  produced  by  a  distinct  proximate  cause,  yet  the  primary 


26 


The  Finances. 


eight  per  cent,  of  the  exchanges  of  a  country  proceed 
upon  credit,  as  is  the  case  in  both  Great  Britain  and 
the  United  States,  just  so  long  will  financial  panics 
recur  with  more  or  less  violence  and  frequenc}^  To 
prevent  them  entirely  is  out  of  the  question ;  how  to 
lessen  their  violence  and  mitigate  the  evils  and  miseries 
they  entail,  should  be  the  inquiry  of  the  political  econ- 
omist and  the  business  of  the  statesman. 

Specie  Payments.  ^ 
No  sooner,  however,  was  the  panic  under  full  head- 
way, than,  in  the  very  midst  of  the  consternation  and 
suffering  it  produced  on  all  sides — except  among  those 
of  large  ready-money  means — the  clamour  for  an  im- 
mediate return  to  specie  payments  grew  largely  in 
volume.  They  who  made  it  were  not  many  in  number, 
nor  did  they  represent  the  public  sentiment  (for  public 
sentiment  everywhere  throughout  the  country  was 
overwhelmingly  against  them),  but  they  were  able 

cause  of  each  and  all  is  inordinate  speculation  begotten  of  the  lust  of  gold. 
Men  are  in  has-te  to  be  rich.  This  is  no  new  thing.  It  has  been  observ- 
able in  all  times  and  in  all  countries.  But  the  fact  is  more  patent  now 
than  ever.  Men  live,  as  they  journey,  at  railroad  pace.  So  long  as  ap- 
pearances can  be  kept  up,  they  lay  the  nattering  unction  to  their  souls 
that  some  lucky  hit  will  make  all  right.  Honesty  gives  place  to  expedi- 
ency. Shifts,  evasions,  trickery,  undermine  the  moral  sense  and  grow 
into  confirmed  habits.  The  shams  of  private  life  are  transported  into 
men's  public  business.  To  seem  is  to  be.  Existence  is  undervalued  un- 
less men  can  grow  to  what  they  seem  as  respects  wealth,  that  is  ;  or,  at 
least,  can  manage  to  make  '  Brummagem  lacquer"  look  like  gold.  Hence 
petty  frauds  develop  into  gigantic  swindles.  Covetousness, — a  madden- 
ing desire  to  bound  at  once,  say  from  competence  to  riches, — hurries  the 
flies  into  the  meshes  cunningly  woven  for  them,  and  the  weak  become 
the  victims."  Mr.  Gilbart  is  writing  of  events  that  happened  under  a 
coin- paying  system. — Principles  and  Practice  of  Hanking,  p.  295. 


The  Finances. 


and  audacious,  and  were  supported  by  what  Edmund 
Burke  calls  "  the  most  dangerous  of  all  parties,  an  ex- 
tensive discontented  moneyed  interest,"  and  the  leading 
journals  of  the  country,  in  both  parties,  were  in  the 
hands  or  control  of  men  of  wealth,  whose  private  for- 
tunes would  be  largely  enhanced  if  specie  payments  could 
be  restored.  They  declared  that  the  panic  was  due  to 
the  existing  currency  system  and  was  inseparable  from 
jt;  that  until  specie  payments  were  resumed  the  public 
creditor  was  the  victim  of  a  fraud  and  an  imposture, 
and  that  the  national  honour  was  therefore  deeply  con- 
cerned in  immediate  resumption  ;  that  the  depreciation 
of  the  currency  was  productive  of  great  evils,  because 
of  the  fluctuations  in  its  value  relatively  to  coin  ;  and 
that  there  could  be  no  solid  and  enduring  business  pros- 
perity until  the  national  currency  and  coin  were  at  a 
permanent  par.  They  quoted  books  of  finance  in 
support  of  these  allegations,  and  brought  to  bear  in 
their  favour  every  fact  of  history  at  their  command ; 
but  they  banished  out  of  sight  equally  important 
facts,  as  if  adverse  facts  had  no  bearing  upon  the 
subject.  Many  leading  members  of  the  great  political 
parties — chiefly  the  men  of  large  property — joined  in 
this  hard-money  crusade,  and  party  conventions,  Demo- 
cratic and  Republican,  in  several  of  the  states  have 
declared  in  the  same  direction. 

But  the  great  body  of  the  people  are  hostile  to  the 
heroic  treatment  of  the  currency  question  proposed  by 
the  bullionists.;  not  because  they  are  irreconcilably 
opposed  to  a  specie-paying  system,  for  they  are  not, 
but  because,  with  intuitive  and  most  sagacious  judg- 
ment, they  clearly  foresee  that,  in  the  present  extra- 


28 


The  Finances. 


ordinary  circumstances  of  the  country,  immediate  re- 
sumption would  be  productive  of  extensive  and  even 
dangerous  social  and  political  calamities. 

Nevertheless,  the  allegations  of  the  bullionists  are 
of  great  importance,  and  if  true  ought  to  determine 
the  people  in  their  political  action. 

Let  Facts  Speak. 
It  has  already  been  abundantly  shown  that  panics 
are  not  peculiar  to  our  currency  system.1  Between 

1  In  1848  committees  were  appointe^  by  the  British  House  of  Lords 
and  also  by  the  House  of  Commons  to  inquire  into  the  commercial  dis- 
tress of  the  preceding  year.  A  large  number  of  merchants  and  bankers 
were  examined  before  both  these  committees,  with  substantially  the  same 
results  so  far  as  the  testimony  went.  The  Lords'  committee  made  a  re- 
port of  great  value  and  importance,  in  the  course  of  which  they 
announced  these  conclusions  : — 

"  It  is  true  that  to  those  who  may  have  expected  that  the  Bank  Act 
of  1844  would  effectually  prevent  a  recurrence  of  cycles  of  commercial 
excitement  and  depression,  the  contrast  between  the  years  1845  and  1847 
must  produce  grievous  disappointment."  (The  reader  will  not  have  for- 
gotten that  the  act  here  referred  to  was  that  of  Sir  Robert  Peel,  the  pur- 
pose of  which  was  to  secure  the  convertibility  of  the  bank-note  under  all 
circumstances,  and  to  so  regulate  the  paper  circulation  as  that  it  could 
not,  at  any  time,  be  greater  than  the  circulation  would  be  if  composed 
exclusively  of  coin.) 

"  To  those  who  anticipated  that  the  act  would  put  a  check  on  improvi- 
dent speculation,  the  disappointment  cannot  be  less,  if  reliance  is  to  be 
placed  (as  the  committee  are  confident  it  may)  on  the  statement  of  the 
Governor  of  the  Bank,  and  of  other  witnesses,  that  speculations-  were 
never  carried  to  such  an  enormous  extent  as  in  1846  and  the  beginning  of 
1847. 

"  If  the  act  were  relied  on  as  a  security  against  violent  fluctuations  in 
the  value  of  money,  the  fallaciousness  of  such  anticipation  is  conclusively 
proved  by  the  fact  that  whilst  the  difference  between  the  highest  and 
lowest  rate  of  discount  was  in  the  calamitous  years  1837  and  1839  but 
two  and  a  quarter  to  two  and  three-quarters  per  cent.,  the  difference  in 
1847  rose  to  six  and  three-quarters. 

"  If  it  was  contemplated  that  the  number  and  extent  of  commercial 


The  Finances, 


2£ 


1857  and  1873  the  American  people  were  free  from 
those  destructive  financial  storms  which  almost  from 
the  beginning  of  the  century  to  and  including  the 
former  year,  had  swept  the  whole  extent  of  the  country 
in  every  decade.  Under  the  monetary  system  which 
prevailed  prior  to  the  rebellion,  it  was  not  in  the 
power  either  of  the  banks  or  of  the  Federal  Treasury  to 
afford    efficient  relief  in  seasons  of  pressure.  But 

failures  would  have  been  lessened,  the  deplorable  narrative  of  the  Gov- 
ernor of  the  Bank,  recording  the  failure  of  thirty-three  houses,  compara- 
tively in  large  business,  in  London  alone,  to  the  amount  of  8,129,000?. 
($40,645,000),  is  a  conclusive  reply. 

"  If  the  enormous  extent  to  which  railroad  speculation  has  been 
carried,  be  considered  as  an  evil  to  which  a  sound  system  of  banking- 
could  have  applied  a  corrective,  such  a  corrective  has  not  been  found  in 
an  act"  (which  the  reader  is  reminded  was  considered  by  the  hard-money 
men  the  final  attainment  of  havd-money  wisdom),  "since  the  passing  of 
which,  during  a  period  of  three  years,  an  increased  railway  capital  of 
221,000,000/.  ($1,105,000,000)  has  been  authorized  to  be  raised  by  Parli- 
ament, and  when  the  enormous  sum  of  76,390,000/.  ($381,950,000)  is 
stated,  on  high  financial  authority,  to  have  been  actually  expended  on 
railways  in  two  and  a  half  years. 

"  If  the  power  of  obtaining  banking  accommodation  on  moderate  terms 
were  considered  to  be  promoted  by  the  Act  of  1844,  it  cannot  be  said 
that  this  important  object  has  been  attained,  since  it  appears  in  evidence 
that  in  1847,  in  addition  to  an  interest  of  nine  or  ten  per  cent,  a  commis- 
sion was  also  frequently  paid,  raising  the  charge  to  ten,  twenty,  or  thirty 
per  cent,  according  to  the  time  which  bills  had  to  run. 

"  The  committee  are  fully  aware  that  alternations  of  periods  of  commer- 
cial excitement  and  of  discredit,  of  speculation  and  of  collapse,  are  likely 
to  arise  under  all  systems  of  currency  ;  that  it  would  be  visionary  to  im- 
agine that  they  could  be  averted  altogether,  even  if  the  circulation  were 
exclusively  metallic.  But  it  is  on  this  account  that  greater  care  should 
be  taken  to  avoid  increasing  an  evil,  perhaps  inevitable,  by  'any  arbi- 
trary and  artificial  enactments.' '  And  the  committee  proposed  that  the 
act  should  be  amended  by  the  introduction  of  a  "  Discretionary  Relaxing 
Power,"  to  be  exercised,  however,  only  during  a  favourable  exchange.  To 
these  general  views,  Mr.  Tooke  gives  the  sanction  of  his  name  and 
authority.    See  Tooke  on  Prices,  vol.  VI.,  p.  497,  et  seq. 


30 


The  Finances. 


during  the  war,  with  the  resources  of  the  present  sys- 
tem at  his  command,  Mr.  Chase  was  able  more  than 
once  (as  I  have  already  stated)  to  avert  financial  dis- 
asters ;  and  Mr.  McCulloch  afterward,  conspicuously 
in  1866,  followed  his  example.  Neither  Mr.  Chase 
nor  Mr.  McCulloch  could  have  rendered  these  great 
public  services, — great  public  services,  I  say,  and  by 
no  means  the  least  important  of  their  respective  ad- 
ministrations— but  for  the  adaptability  of  a  paper  cur- 
rency to  meet  sudden  financial  emergencies.1 

The  Public  Creditor. 
But  it  is  declared  that  the  continued  inconvertibility 
of  legal  tender  notes  is  a  fraud  upon  the  public  creditor, 
and  therefore  wounding  to  the  national  honour.  If 
this  were  true,  it  would  be  a  matter  for  the  gravest 
consideration  and  the  promptest  redress  in  the  power 
of  the  people  to  make.  But  it  is  not  true.  The 
bonded  debt  of  the  United  States  sells  to-day  in .  the 
markets  of  the  world  at  the  par  of  American  gold 
coin,  and  the  public  faith  of  the  nation  was,  in  1869, 
solemnly  pledged  by  Congress  to  the  payment  of  that 
debt,  principal  and  interest,  in  our  current  coin.  So 

1  "  Whenever  merchants  have  a  want  of  confidence  in  each  other, 
which  disinclines  them  to  deal  on  credit  or  to  accept  in  payment  each 
others'  cheques,  notes  or  bills,  more  money,  whether  it  be  paper  or  metal- 
lic, is  in  demand  ;  and  the  advantage  of  a  paper  circulation,  when  estab- 
lished on  correct  principles,  is,  that  this  additional  quantity  can  be  pres- 
ently supplied  without  occasioning  any  variation  in  the  value  of  the  whole 
currency,  compared  with  bullion  or  any  other  commodity  ;  whereas,  with 
a  system  of  metallic  currency,  this  additional  quantity  cannot  be  so  read- 
ily supplied,  and  when  it  is  finally  supplied,  the  whole  of  the  currency, 
as  well  as  bullion,  has  acquired  an  increased  value." — Works  of  D. 
Kicardo,  by  J.  R.  McCulloch,  page  399. 


The  Finances. 


31 


far  there  lias  been  no  default  in  respect  to  that  promise, 
and  there  will  be  none.  No  matter  what  party  poli- 
ticians may  resolve  in  party  conventions,  or  partisan 
newspapers  allege  in  times  of  controversy,  it  is  at  once 
an  infamous  falsehood  and  an  infamous  outrage  to 
charge  that  any  portion  of  the  people,  East  or  West, 
are  in  favour  of  repudiation,  or  of  anything  less  than 
a  fulfilment,  in  perfect  good  faith,  of  all  the  national 
obligations.  But  this  fulfilment,  in  good  faith,  of  all 
the  national  obligations,  requires  no  sacrifice  of  the 
national  justice.  That  is  a  false  and  fantastic  devotion 
to  the  national  honour  which  exacts  a  universal  op- 
pression to  serve  the  interest  of  the  public  creditor.1 

It  may  truly  be  said,  then,  that  so  far  as  the  in- 
terest-paying debt  is  concerned,  the  public  creditor  has 
no  just  ground  of  complaint.  He  receives,  strictly  in 
accordance  with  the  Government  agreement,  in  pay- 
ment of  interest,  the  current  coin  of  the  Republic  of  the 
legal  weight  and  fineness,  and  on  maturity  of  the  debt, 
the  principal  will  be  paid  in  the  same  way.  When 
a  demand  is  made  that  the  value  of  the  coin  shall 
be  augmented  by  ten  or  twenty  or  fifty,  or  even  one 
per  cent.,  a  new  contract  is  proposed  rather  than  an 
honest  compliance  with  the  old  one. 


1  "  It  is  to  the  property  of  the  citizen,  and  not  to  the  demands  of  the 
creditor  of  the  state,  that  the  original  faith  of  civil  society  is  pledged. 
The  claim  of  the  citizen  is  prior  in  time,  paramount  in  title,  superior  in 
equity.  *****  The  public,  whether  represented  by  a  monarch  or  by 
a  Senate,  can  pledge  nothing  but  the  public  estate,  and  it  can  have  no 
public  estate  except  in  what  it  derives  from  a  just  and  proportioned  im- 
position upon  citizens  at  large.  This  is  engaged,  and  nothing  else  can 
be  engaged,  to  the  public  creditor." — Edmund  Burke,  <;  Reflections  on 
the  Revolution  in  France." 


32 


The  Finances. 


The  drift  of  this  is  not  difficult  to  be  seen.  Imme- 
diate resumption  of  specie  payments  would  enormously 
enhance  the  value  of  our  gold  coin  :  in  my  judgment 
the  contraction  indispensable  to  enduring  resumption, 
would  depress  prices,  throughout  the  whole  range  of 
commodities,  thirty  to  fifty  per  cent.,  and  this  vast 
confiscation  of  the  property  of  citizens,  equally  entitled 
to  public  protection  with  the  public  creditor,  is  deemed 
necessary,  it  seems,  to  support  and  preserve  the  na- 
tional honour ! 

It  is  impossible  to  deny  that  the  position  of  the  bill- 
holder  is  by  no  means  so  satisfactory  as  that  of  the 
bondholder.  It  must  be  admitted,  however,  that  the 
bill-holder  is  not  a  public  creditor  in  the  distinct  and 
emphatic  sense  in  which  the  bond-holder  is  such.  The 
bond-holder  seeks  the  Government  obligation,  because 
the  Government  is  the  most  convenient  and  responsible 
debtor  within  his  reach.  The  engagement  of  the  Gov- 
ernment, in  this  case,  is  clear  and  specific,  particularly 
set  forth  in  the  bond,  fixing  time  and  place  and  the 
nature  of  the  payment  to  be  made,  thus  responding 
to  the  particular  objects  of  the  creditor,  which  are  safety 
and  profit. 

Is  this  true  of  the  bill-holder  ?  It  certainly  is  not 
true.  If  two  hundred  millions  of  United  States  notes 
pass  daily  between  citizens  in  exchange  of  commodi- 
ties, probably  not  one  of  the  ten  or  twenty  millions 
of  those  who  receive  and  pay  them,  thinks  of  the 
Government  as  his  debtor,  or  has  the  remotest  thought 
of  demanding  redemption  of  the  notes  in  coin.  Every- 
one knows  the  "  promise  to  pay "  imprinted  upon 
them  to  be  conditional,  and  no  one  doubts  their  ulti- 


The  Finances. 


33 


mate  redemption.  The  purpose  of  their  issue  is  per- 
fectly understood ;  they  are  intended  to  form,  and  do 
form,  our  current  instrument  of  exchange  ;  their  credit 
is  established,  their  value  sure  and  uniform,  and  they 
perform  all  the  functions  of  money  with  as  effective 
an  energy  as  coin  would  if  coin  were  the  exclusive 
circulation.  About  this  there  is  no  shadow  of  doubt ; 
nor  can  there  be  any  doubt  that,  if  the  whole  United 
States  notes  and  National  Bank  notes  were  reduced  in 
volume  to  four  hundred  millions,  they  would  be  as 
valuable  as  four  hundred  millions  of  standard  gold, 
though  there  might  not  be  a  single  dollar  of  gold  coin 
available  for  their  redemption.  That  the  currency  is 
excessive  may  be  admitted,  but  the  business  of  the 
country  has  adjusted  itself  to  the  volume  as  it  exists ; 
and  prices  would  be  just  as  high  if  the  circulation  were 
composed  of  eight  hundred  millions  of  gold  dollars 
instead  of  eight  hundred  millions  of  paper  ones. 

In  this  view  of  the  case,  it  seems  to  me  a  mean  and 
indefensible  exaggeration  to  talk  of  "  rag  money,"  "  na- 
tional bankruptcy,"  "  violated  national  honour,"  "  repu- 
diation," and  the  like.  Such  phrases  confound  all  fair 
discussion,  and  lead  us  no  single  step  nearer  the  truth. 
It  is  incumbent  upon  those  who  indulge  this  sort  of 
declamation  to  prove  that  the  existing  currency  system 
is  attended  by  evils  which  a  coin  circulation  would 
avert ;  and  this,  I  confidently  allege,  they  cannot  do. 
There  is  no  evil  attending  upon  it  which,  in  kind  and 
degree,  has  not  attended  upon  the  coin-paying  system 
of  Great  Britain ;  the  only  mixed-currency  system  in 
the  world  which  operates  automatically,  as  an  exciu- 


The  Finances. 


sively  metallic  system  would  operate  if  there  were  no 
paper  notes  for  redemption. 

Our  Currency  Inimical  to  Sound  Business. 
It  is  said,  finally,  that  our  paper-money  is  inimical 
to  permanent  business  prosperity.  Let  facts  speak,  and 
thev  do  not  bear  out  this  allegation.  The  most  bril- 
liant  period  in  the  history  of  material  progress  in  Great 
Britain  was  that  during  which  inconvertible  bank-notes 
formed  the  exclusive  circulation  of  the  empire.  An 
average  population  of  eleven  and  a  half  millions,  living 
upon  an  island  of  175,000  square  miles  of  sea  and 
land  (with  a  total  surface  of  77.513,000  English  acres, 
less  than  46,000,000  of  which  is  under  cultivation  at 
this  very  day),  without  one-half  the  industrial  appli- 
ances of  this  time,  raised  and  expended  in  a  period  of 
twenty-four  years  of  war, — that  is  between  1792  and 
1816  inclusive — by  loans  and  taxes,  five  THOUSAND 

FOUR  HUNDRED  AND  TEN  MILLIONS  OF  DOLLARS  !  (exclu- 
sive of  debt  at  the  close  of  the  wars)  besides  during  the 
same  period  more  than  doubling  the  national  wealth  ! 

Between  1861  and  1870,  and  inclusive  of  those  years, 
notwithstanding  the  pressure  of  a  most  wasteful  re- 
bellion during  live  years  of  that  time,  the  people  of 
the  United  States  (I  do  not  include  in  this  any  of  the 
expenditures  of  the  Confederate  States)  raised  and 
expended  by  loans  and  taxes,  four  thousand  three 

HUNDRED  AND  FIFTY-ONE  MILLIONS  OF  DOLLARS  !  (and  this 

exclusive  of  the  public  debt  remaining  at  the  end  of 
the  war),  besides  increasing  the  aggregate  of  the  na- 
tional wealth  from  sixteen  thousand  millions  in  I860 
to  twenty-five  thousand  millions  in  1870.     It  is  no 


The  Finances. 


35 


wonder  that  the  people  look  back  to  that  brilliant, 
exciting  and  destructive  period,  with  fascinated  imag- 
ination. 

At  a  future  time,  I  shall  show  by  facts  which  are 
demonstrations,  that  between  1866  and  September 
1873,  when  the  panic  broke  loose  in  New  York,  the 
variations  in  the  prices  of  commodities  were  no  greater 
.  (though  higher)  in  the  United  States  under  a  "  shock- 
ing bad"  currency  system  than  they  were  in  England 
during  the  same  period  under  a  system  which  is  held 
up  as  the  greatest  achievement  of  hard-money  wisdom  ! 

In  a  word,  there  is  no  function  of  hard-money  which 
the  current  paper-money  of  the  country  does  not  per- 
form as  promptly,  as  certainly  and  as  safely  as  coin 
would  if  there  were  no  paper-money.  This  refers  to 
our  domestic  exchanges  of  course. 

All  the  same,  gold  and  silver  are  the  best  money, 
though  it  is  quite  within  the  limits  of  human  achieve- 
ment that  a  paper-money  system  may  ultimately  be  de- 
vised which  will  supersede  the  use  of  coin.  I  may  quote 
in  support  of  this  thought,  the  words  of  an  English 
economist  of  great  and  deserved  distinction :  "  A  well 
regulated  paper  currency,"  says  David  Ricardo,  "  is  so 
great  an  improvement  in  commerce,  that  I  should 
greatly  regret  if  prejudice  should  induce  us  to  return 
to  a  system  of  less  utility.  The  introduction  of  the 
precious  metals  for  the  purposes  of  money  may  with 
truth  be  considered  as  one  of  the  most  important  steps 
towards  the  improvement  of  commerce  and  the  arts  of 
civilized  life ;  but  it  is  no  less  true  that,  with  the  ad- 
vancement of  knowledge  and  science,  we  discover  that 
it  would  be  another  improvement  to  banish  them 


36 


The  Finances. 


again  from  the  employment  to  which,  during  a  les.-- 
enlightened  period,  they  had  been  so  advantageously 
applied."1 

Depreciation  and  Fluctuation. 
But  it  is  said  that  our  currency  is  depreciated  rela- 
tively to  gold,  and  that  it  fluctuates  in  value.  That 
it  is  depreciated  no  one  can  deny,  but  we  must  distin- 
guish between  a  true  depreciation  and  one  purely  artifi- 
cial. The  true  depreciation  is  two  to  five  per  cent. ; 
all  further  difference  is  due  to  that  unwise  and  inde- 
fensible policy  of  the  Government  which  made  the 
interest  on  the  public  debt  payable  in  coin.  This 
established  a  necessity  for  the  compulsory  presence  in 
the  country  of  a  stock  of  specie  approximating  in 
in  amount  to  the  sum  required  to  pay  interest  on  public 
debt  in  each  year ;  and  no  one  need  be  told  that  the 
pressure  of  this  necessity  has  exerted  a  powerful  action 
upon  its  price.  Were  this  abnormal  pressure  removed, 
the  excess  of  coin  would  go  abroad  in  the  natural  course 
of  trade,  as  more  than  a  thousand  millions  have  gone 
since  1860  ;  and  we  should  behold  the  curious  specta- 
cle of  a  reduced  price*  with  a  diminished  stock  !  and 
at  the  same  time,  the  real  measure  of  depreciation 
would  be  accurately  ascertained.2 

1 "  Works  of  David  Ricardo,'"  by  J.  R.  McCulloch,  page  404. 

2  Bonainy  Price,  Professor  of  Political  Economy  in  the  University  of 
Oxford  (England),  and  a  respectable  authority  in  financial  science,  ar- 
rived in  New  York  in  September  last.  A  day  or  two  afterwards  he  was 
"  interviewed*'  by  a  representative  of  the  New  York  Tribune.  At  the 
very  outset  of  the  interview  Mr.  Price  denounced  our  currency  as- 
u  shocking  bad.'1  Further  on,  he  was  asked  whether  he  considered  the 
current  premium  on  gold,  as  quoted  in  the  street,  to  be  a  tolerably  accurate 
measure  of  the  depreciation  of  legal  tender  notes.    Mr.  Price  said  he 


The  Finances. 


37 


Tt  is  said,  also,  that  our  paper-money  fluctuates  in 
value.  So  it  does.  But  the  same  may  be  said  of  money 
in  all  commercial  countries,  and  in  no  kingdom  of  the 
world  more  so  than  in  England,  where  they  have  a 
monetary  system  which  is  the  very  darling  of  the 
genuine  hard-money  men.  Since  1860  there  have 
been  a  hundred  and  fifty  variations  in  Bank  of  England 
rates,  and  interest  and  commissions  have  been  paid, 
by  parties  of  undoubted  solvency,  ranging  all  the  way 
from  two  and  a  half  to  twenty  per  cent.  And  it  is 
utterly  puerile  to  expect  that  a  return  to  cash  pay- 
ments will  prevent  fluctuations  of  money  as  great  and 
as  frequent  as  under  the  present  system,  and  I  doubt 
whether  any  man  of  candour  and  information  does 
expect  it. 

Specie  Payments. 
Were  it  proved,  however,  a  hundred  times  over,  as 
probably  it  could  be,  that  there  is  no  evil  attendant 
upon  a  well  regulated  paper-currency  system  which 
does  not  attend,  both  in  kind  and  degree,  upon  a  mixed- 
currency  or  even  exclusively-metallic  system,  the  de- 
mand for  a  return  to  specie  payments  would  go  on  all 
the  same.  I  do  not  deny  that  ultimately  resumption  is 
desirable.  The  reason  is  that  gold  and  silver  are  true 
money  :  their  value  is  everywhere,  the  world  over, 
known  and  recognised,  and  as  few  artificial  impedi- 
ments as  possible  should  be  put  upon  the  intercourse 

was  not  aware  of  any  circumstances  to  show  that  it  was  not.  I  cannot 
help  thinking  that  it  was  questionable  taste  for  Mr.  Price  thus  to  darken 
counsel  without  knowledge.  A  professor  of  political  economy  who  un- 
dertakes to  denounce  the  currency  of  the  country  as  "shocking  bad.'' 
ought  at  least  to  acquaint  himself  with  all  the  facts  necessary  to  form 
a  smnd  judgment. 


33 


The  Finances. 


of  mankind.  "A  Universal  Money,"  if  such  a  thing 
were  attainable,  would  be  a  grander  and  more  effective 
peace-maker  than  all  the  "  International  Congresses'* 
and  "  Parliaments  of  Man"  that  could  be  assembled  in 
Central  Park.  Nevertheless,  in  mere  local  effects, 
there  is  probably  very  little  material  difference  between 
a  well  regulated  paper-currency  system  and  a  mixed- 
currency. 

But  there  must  be,  according  to  the  unconditional 
bullionists,  no  delay  in  resumption.  The  great  work 
must  begin  at  once. 


The  Vital  Question. 

u  Behold  Leviathan !  can'st  thou  put  a  ring  in  his  nose  or  bore 
through  his  jaw  with  a  buckle  ?'*  Job  xl.  21. 

This,  then,  becomes  the  vital  question, — By  what 
means  is  resumption  to  be  effected  ?  The  answer  is 
simple  and  brief :  By  Contraction  ;  stern,  unrelenting 
and  persistent  contraction.  This  is  the  infallible  pro- 
cess and  there  is  none  other.  All  methods  not  based 
upon  contraction  ought  to  be  entitled,  "  Plans  to  re- 
sume without  resuming/'  They  proceed  upon  the 
idea  that  a  nominal  resumption  will  answer  the  pur- 
pose ;  but  mere  trickery  wont  do.  We  must  have  a 
stock  of  coin  adequate  to  all  demands.  We  must  con- 
tract the  currency  till  prices  are  depressed  below  the 
level  of  prices  in  Europe  :  when  our  commodities  are 
cheaper  than  gold  is  dear  and  profitable  in  foreign 
countries,  then  foreign  gold  will  flow  in  upon  us  and 
the  product  of  our  mines  will  remain  at  home.  To 


The  Finances.  .  39 


effect  all  this  the  natural  tide  of  trade  must  be  re- 
versed; a  vast  destruction  of  the  property  of  innocent 
and  unoffending  citizens  must  take  place,  a  frightful 
and  wide-spread  suffering  be  inflicted,  crime  and  pauper- 
ism enormously  increased,  and  the  danger  even  of  po- 
litical calamities  incurred.  There  is  no  thoughtful 
citizen  who  will  not  view  these  consequences  with  a 
prefound  apprehension ;  and  that  they  are  almost  cer- 
tain to  follow  upon  excessive  contraction  reason  and 
history  alike  attest.  The  experience  of  England,  in  a 
similar  conjuncture,  is  important  and  conclusive. 

Suspension  of  the  Bank  of  England. 
You  will  recollect  that  the  Bank  of  England  sus- 
pended specie-payments,  under  the  authority  of  an 
Order  of  the  King's  Council — subsequently  approved 
by  Parliament — in  February  1797.  and,  so  far  as  the 
convertibility  of  its  notes  was  concerned,  remained  in 
suspension  till  the  summer  of  1821.  a  period  of  sub- 
stantially twenty-five  years.  During  this  long  interval 
the  circulation  of  the  United  Kingdom  was  composed 
wholly  of  inconvertible  notes  of  the  Bank  of  England 
and  of  the  country  banks.  For  two  years  after  sus- 
pension, the  currency  may  be  considered  as  having 
been  at  the  strictest  bullion  level  with  the  rest  of  the 
commercial  world,  or.  if  anything,  at  a  somewhat 
higher  value,  as  the  exchange  on  Hamburg  from 
January  to  March  of  1799  was  higher  (lower)  than  it 
had  been  for  any  length  of  time  before  the  suspen- 
sion."1   In  the  fall  of  1799     a  combination  of  circum- 

1  Tooke's  11  History  of  Prices."  Vol.  I.,  p  240.  The  English  method  of 
computing  the  clearness  or  cheapness  of  foreign  exchange  is  directly  the 


40 


The  Finances. 


stances  arose,"  says  Mr.  Tooke,  "  which  entailed  the 
payment  of  unusually  large  sums  abroad,"  and  the  ex- 
changes on  Hamburg  fell  (rose),  and  bills  to  a  limited 
amount  only  were  available.  The  alternative  was  to 
send  bullion,  which  was  exported  in  large  quantities, 
but  up  to  September  1799  "  the  market  price  of  stand- 
ard gold  had  continued  at  ol.  17  s.  6c7.  per  ounce, 
though  the  price  of  foreign  gold  in  coin  had  been  some- 
what higher,  on  account  of  its  greater  use  as  coin  than 
as  bullion.  But  in  June  1800  the  price  of  gold  ex- 
perienced a  sudden  and  extraordinary  rise;  it  rose  to 
4/.  5s.  per  ounce ;  silver  rose  also,  and  the  foreign  ex- 
changes fell  below  par.  In  January  1801  gold  and 
silver  had  each  risen  Is.  per  ounce,  and  the  exchange 
on  Hamburg  was  at  29s.  ScL,  being  a  depression  of  14 
per  cent,  below  par."1  The  increase  in  the  Bank-note 
circulation,  however,  did  not  fill  up  the  void  occasioned 
by  export  of  the  precious  metals  ;2  nevertheless,  a  rise 
in  the  prices  of  provisions  took  place,  coincident,  how- 
ever, with  a  similar  rise  upon  the  Continent.  This 
state  of  facts  led  to  an  almost  immediate  discussion  of 
the  "  currency  question,"  which,  in  time,  grew  to  be 
heated  and  virulent.  The  bullionists  charged  the  rise 
in  prices  to  an  excess  of  inconvertible  Bank-notes, 
which  of  course  was  vehemently  denied  by  the  friends 
of  the  Bank  and  of  the  existing  Ministry.  Meantime, 
as  the  years  wore  on  the  difference  between  coin  and 

opposite  of  our  American  method.  Suppose,  for  example,  two  different 
rates  for  bills  on  Hamburg  ;  in  one  case,  a  100/.  bill  costs  100/.  ;  in  the 
second,  the  same  bill  costs  102/.  The  English  merchant  would  say  that, 
in  the  first  instance,  exchange  was  higher,  and  in  the  second,  lower. 

1  "Theory  and  Practice  of  Banking.'"  by  H.  D.  MacLeod,  II.  3. 

2  Tooke' s  "  History  of  Prices,"  I.  250. 


The  Finances. 


41 


paper  grew  wider,  although  between  the  years  1803 
and  1808  it  was  no  more  than  21.  Ids.  2d.  per  cent. 
After  1808  it  averaged, 


Price  of  Gold. 

Difference  from  Mint  Prices. 

£ 

s. 

d. 

In  1809,  . 

4 

10 

9 

16i    per  cent. 

1810,  .... 

4 

5 

0 

1811,      .      J  , 

4 

17 

1 

24£  " 

1812,  .... 

5 

1 

4 

30  ;' 

September  to  December  1812, 

5 

8 

0 

38£  " 

In  1813,  .... 

5 

6 

2 

3<Vo  " 

November  1812  to  March  1813 

5 

10 

0 

41 

In  1814,  .... 

5 

1 

8 

301  « 

1815,      .       .       .  i'^- 

4 

12 

9 

18* 

1816,      .  > 

4 

0 

0 

91  << 

October  to  December  1816,  . 

3 

18 

6 

Under  1  per  cent. 

In  1817  

4 

0 

0 

2£   per  cent. 

1818,  . 

4 

1 

5 

5  " 

1819  to  February,  . 

4 

3 

0 

H 

1820,      .       .      .  i 

3 

17 

Par. 

In  1810  the  famous  Bullion  Committee  was  appointed. 
It  numbered  among  its  members  some  of  the  most 
distinguished  names  in  the  Commons :  among  others 
those  of  Mr.  Francis  Horner  (chairman),  Mr.  Spencer 
Perceval,  Mr.  Tierney,  Mr.  Parnell,  Mr.  Huskisson, 
Mr.  Baring,  Mr.  Grenfell  and  Mr.  Sheridan.  Says 
Henry  Dunning  MacLeod,1  "The  witnesses  examined 
before  the  Committee  consisted  of  Bank  directors, 
private  bankers,  general  merchants,  and  independent 
witnesses.  The  directors  of  both  the  English  and  the 
Irish  banks  vehemently  repudiated  the  idea  that  the 
Bank  paper  was  depreciated ;  they  equally  maintained 
that  it  was  the  price  of  specie  that  had  risen ;  they 
both  denied  that  the  issues  of  their  notes  had  any 


1  MacLeod.    "  Theory  and  Practice  of  Banking,''  Vol.  II.  p.  23. 


42 


The  Finances. 


effect  upon  the  foreign  exchanges,  or  were  in  any  way 
the  cause  of  the  high  adverse  exchange,  and  they  both 
denied  that  a  limitation  of  their  issues  would  have  the 
slightest  effect  in  reducing  the  exchange  to  par.  They 
both  maintained  that  there  could  be  no  over-issue  of 
their  notes  so  long  as  they  were  confined  to  the  dis- 
count of  paper  of  undoubted  solidity  founded  upon 
real  transactions."  In-  a  word,  most  of  the  witnesses 
examined  before  the  Committee  attributed  the  high 
price  of  gold  to  scarcity  arising  out  of  a  great  demand 
for  use  upon  the  Continent;  and  if  it  be  true,  as  it 
seems  cannot  reasonably  be  doubted,  that  the  depre- 
ciation of  our  legal  tenders  is  partly  due  to  a  necessity 
for  the  compulsory  presence  in  the  country  of  a  large 
stock  of  coin  which  would  otherwise  go  abroad,  it  can 
hardly  be  doubted  that,  in  like  manner,  the  depreci- 
ation of  English  Bank-notes  was  in  part  occasioned  by 
scarcity  and  government  demand. 

But  the  conclusions  and  report  of  the  Committee 
were  opposed  to  the  views  of  most  of  the  witnesses 
examined  before  it.  The  Committee  recommended  a 
resumption  of  cash  payments ;  but  admitted,  at  the 
same  time,  that  this  was  an  operation  of  the  greatest 
delicacy,  though  they  thought  it  could  be  accomplished 
in  two  years.  The  Parliament  thought  otherwise,  how- 
ever, and  rejected  the  proposition  to  return  to  specie 
payments  in  two  years  by  a  decisive  and  even  emphatic 
vote. 

The  French  Revolutionary  and  Napoleonic  Wars 
were  ended  in  1815,  and  from  thenceforward  to  the 
year  1819  the  4  6  Currency  Question"  was  the  overshad- 
owing topic  of  English  discussion,  until  at  length  in 


The  Finances, 


43 


February  of  the  latter  year  both  Houses  of  Parlia- 
ment appointed  Committees  to  inquire  into  the  "  State 
of  the  Bank,"  and  in  April  subsequent  both  Committees 
reported  recommending  an  early  resumption  of  cash 
payments.  Upon  the  reports  of  these  Committees 
Parliament  took  prompt  action,  and  in  May  "  Peel's 
bill" — so  called  because  the  resolutions  for  resumption 
were  introduced  into  the  Commons  by  Mr.  Peel,  after- 
wards the  second  Sir  Robert  Peel — was  enacted  into  a 
law.    Its  provisions  were  these  : 

1.  The  Acts  then  in  force  legalizing  the  Bank  sus- 
pension were  to  be  continued  to  the  1st  of  May  1823,. 
when  their  operation  was  finally  to  cease. 

2.  "  That  on  and  after  the  1st  of  February  and 
before  the  1st  of  October  1820,  the  Bank  of  England 
should  be  bound,  on  any  person  presenting  an  amount 
of  their  notes  not  less  than  of  the  value  or  price  of 
60  ounces,  to  pay  them  on  demand  at  the  rate  of  4/. 
Is.  per  ounce,  in  standard  gold  bullion  stamped  and 
assayed  at  the  Mint. 

3.  "  That  between  the  1st  of  October  1820  and  the 
1st  of  May  1821,  it  should  pay  in  a  similar  manner  in 
gold  bullion  at  the  rate  of  3?.  19s.  6c/.  per  ounce. 

4.  "  That  between  the  1st  of  May  1821  and  the  1st 
of  May  1823,  the  rate  of  the  gold  bullion  should  be  SL 
17s.  lOhd.  per  ounce. 

5.  "  During  the  period  first  above  mentioned,  it 
might  pay  in  gold  bullion  at  any  rate  less  than  M.  Is. 
and  not  less  than  3/.  19«§.  6cZ.  per  ounce;  in  the  second 
period  at  any  rate  less  than  3Z.  19-5.  6e?.  and  not  less 
than  31.  17s.  lOid.  upon  giving  three  days'  notice  in 


44 


The  Finances. 


the  Gazette  and  specifying  the  rate;  but  after  giving 
this  notice  the  Bank  was  not  again  to  raise  the  ra.te. 

6.  "  These  payments  were  to  be  made  in  bars  or 
ingots  of  the  weight  of  sixty  ounces  each,  and  the  Bank 
might  pay  any  fractional  sum  less  than  40s.  above 
that  in  the  legal  silver  coin. 

7.  "The  trade  in  gold  bullion  and  coin  was  declared 
entirely  free  and  unrestrained."1 

But  it  must  not  be  supposed  that  there  was  no 
opposition  to  the  policy  of  this  enactment,  for  there 
was  and  of  a  very  powerful  kind  too.  The  Bank  di- 
rectors protested  against  it,  and  submitted  to  the  legis- 
lature their  views  of  what  the  effects  of  the  act  must 
be  in  the  existing  commercial  and  monetary  state  of 
the  country.  They  said  they  could  not  help  thinking 
the  measure  one  fraught  with  great  risk  and  uncer- 
tainty ;  and  that  "  they  could  not  venture  to  advise 
an  unrelenting  continuance  of  pecuniary  pressure  upon 
the  commercial  world  the  consequences  of  which  it  was 
impossible  for  them  to  foresee  or  estimate nor  could 
they  take  the  responsibility  of  countenancing  a  meas- 
ure in  which,  they  said,  "  the  whole  community  was 
so  deeply  involved,  and  which  would  possibly  com- 
promise the  universal  interests  of  the  empire  in  all  the 
relatiom  of  agriculture,  manufactures,  commerce  and 
revenue."  The  merchants  and  bankers  of  London  and 
Bristol  joined  in  a  petition  against  it,  which  was  pre- 
sented in  the  Commons  by  Sir  Robert  Peel,  who  en- 
treated the  House  to  pause  before  the  passage  of  a 
measure  so  destructive  of  commercial  interests  and 
with  them  of  every  other  interest  in  the  country,  and 


1  MacLeod,  "  Theory  and  Practice  of  Banking,"  II.  74. 


The  Fifiances. 


45 


to  collect  all  possible  information  upon  the  subject. 
The  petitioners  said  that  in  their  opinion  the  measure 
would  result  in  a  forced,  precipitate  and  highly  injurious 
<'<>nt ruction  of  the  currency,  which  would  add  greatly  to 
increase  the  pressure  of  the  taxes,  to  lower  the  value  of 
<dl  land  and  commercial  property,  seriously  to  affect 
and  embarrass  both  public  and  private  credit,  to  embar- 
rass and  reduce  all  the  operations  of  agriculture,  manu- 
factures and  commerce,  and  to  throw  out  of  employment 
a  great  proportion  of  the  industrious  and  labouring  classes 
of  the  community. 

On  the  other  hand,  the  friends  of  the  measure,  and 
conspicuously  Mr.  Peel  and  Mr.  Ricardo  (the  latter 
the  distinguished  political  economist),  denied  that  the 
resumption  would  be  attended  by  evil  consequences; 
and  Mr.  Ricardo  declared  that  the  "  whole  difficulty 
would  be  in  raising  the  value  of  the  currency  three  per 
cent/' 

What  Sir  Archibald  Alison  says.1 
"The  effects  of  this  extraordinary  piece  of  legislation 
were  soon  apparent.  The  industry  of  the  nation  was 
speedily  congealed,  as  a  flowing  stream  is  by  the  severity 
of  an  Arctic  winter.  The  alarm  became  as  universal 
and  widespread  as  confidence  and  activit}^  had  recently 
been.  The  country  bankers,  who  had  advanced  largely 
on  the  stocks  of  goods  imported,  refused  to  continue 
their  support  to  their  customers,  and  they  were  forced  to 
brine  their  stocks  into  the  market.  Prices  in  conse- 
quence  fell  rapidly  ;  that  of  cotton,  in  particular,  sank 
in  three  months  to  half  its  former  level.  The  country 
bankers'  circulation  was  contracted  by  no  less  than 

1  "  History  of  Europe,"  Second  Series,  vol.  II.  chap.  X.  p.  144-5, 
(Blackwood's  duodecimo  edition,  MDCCCLXIV). 


46 


The  Finances. 


five  millions  sterling($25, 000,000);  and  the  entire  circu- 
lation of  England  fell  from  $232,545,000  in  1818  to 
§174,385,000  in  1820,  and  in  the  succeeding  year  it 

sank  as  low  as  $142,757,000  

"  The  effects  of  this  sudden  and  prodigious  con- 
traction of  the  currency  were  soon  apparent,  and  they 
rendered  the  next  three  years  a  period  of  ceaseless 
distress  and  suffering  in  the  British  Islands.  The  ac- 
commodation granted  by  bankers  diminished  so  much, 
in  consequence  of  the  obligation  laid  upon  them  to  pay 
in  specie  which  was  not  to  be  got,  that  the  paper  under 
discount  at  the  Bank  of  England,  which  in  1810  had 
been  $115,000,000,  and  in  1815  not  less  than  $103r 
300,000,  sank  in  1820  to  $23,360,000!  and  in  1821 
to  $13,610,000  !  The  effect  upon  prices  was  not  less 
immediate  or  appalling.  They  declined  in  general, 
within. six  months,  to  half  their  former  amount,  and 
remained  at  that  low  level  for  the  next  three  years. 
Distress  was  universal  in  the  latter  months  of  1819, 
and  that  distrust  and  discouragement  were  felt  in  all 
branches  of  industry  which  are  at  once  the  forerunner 
and  the  cause  of  disaster." 

What  the  Bank  and  the  Bankers  did. 

The  Bank  of  England  and  the  country  banks,  in 
order  to  resume  and  sustain  a  condition  of  specie  pay- 
ments, at  once  began  a  course  of  vigorous  and  necessary 
contraction,  reduced  their  issues  in  a  period  of  five 
years  by  nearly  one-half  of  their  whole  amount,  as 
the  subjoined  table  will  show  :l 

1  Tooke's  "  History  of  Prices,"  rited  by  Sir  A.  Alison.  I  have  con- 
verted English  pounds  into  American  dollars  at  the  rate  of  five  of  the 
latter  for  one  of  the  former. 


The  Finances. 


47 


YEARS. 

BANK   OF  ENGLAND. 

COUNTRY  BANKERS. 

TOTAL. 

1818 

$130,010,535 

$101,535,000 

$232,545,750 

1819 

126,263,450 

78,506,640 

204,770,090 

1820 

121.496,700 

52.881,225 

174,377,925 

1821 

101,476,500 

41,280,900 

142,757,400 

1822 

87.323,950 

42,408,100 

129,732,050 

The  Bank  of  England  reduced  its'  private  securities 
from  thirty-two  millions  of  dollars  in  1819  to  some- 
thing more  than  twelve  millions  in  1821 ;  and  this  was 
the  average  reduction  in  discounts  made  by  the  London 
discount  houses  and  the  country  bankers,  and  shows 
how  extensively  and  calamitously  the  commerce  and 
industries  of  the  country  were  overwhelmed  by  the 
operation  of  the  contraction. 

The  Fall  in  Wages. 
"In  all  the  great  stations  of  the  cotton  manufacture, 
as  Manchester,  Glasgow,  Paisley,  the  rate  of  wages  has 
fallen  on  an,  average  more  titan  one-half." — Lord  Lans- 
downe's  speech,  December  1st  1819.  "  It  is  not  sur- 
prising that  the  Ministers  alluded  to  the  suffering 
which  pervaded  several  branches  of  manufacturing  in- 
dustry, for,  from  the  papers  laid  before  Parliament,  it 
appeared  that  wages  in  the  .cotton  manufacture  had  sunk 
a  half  within  eight  months,  and  in  most  other  trades  in 
the  same  proportion." — Sir  Archibald  Alison,  History 
of  Europe,  Second  Series,  Chap.  X. 

What  Mr.  Baring  said. 
"  In  looking  at  this  question," — that  is,  the  facts 


48 


The  Finances. 


growing  out  of  the  contraction  of  the  currency. — "it  is 
material  to  show  what  is  the  state  of  the  country  in 
this  the  sixth  year  of  the  peace.  Petitions  are  coming 
in  from  all  quarters,  remonstrating  against  the  state 
of  suffering  in  which  so  many  classes  are  involved,  and 
none  more  than  the  agricultural  class.  When  such  is 
the  state  of  the  country  in  the  sixth  year  of  peace,  and 
when  all  the  idle  stories  about  over-production  and 
under-consumption,  and  such-like  trash,  have  been 
swept  away,  it  is  natural  to  inquire  into  the  state  of  a 
country  placed  in  a  situation  without  a  parallel  in  any 
other  nation  or  time.  .  No  country  ever  before  pre- 
sented the  continuance  of  so  extraordinary  a  spectacle 
as  that  of  living  under  a  progressive  increase  in  the 
value  of  money  and  decrease  in  the  value  of  the  pro- 
ductions of  the  people.  It  appears  clear  that  from 
the  operations  of  the  currency,  toe  have  loaded  ourselves 
not  only  with  an  immense  public  debt,  bid  also  with  an 
increased  debt  between  individual  and  individual,  the 
weight  of  which  continues  to  press  upon  the  country, 
and  to  the  continuance  of  which  pressure  no  end  can 
be  seen." 

What  Mr.  Doubleday  says. 

"  We  have  already  seen  the  fall  in  prices  produced 
by  the  immense  narrowing  of  the  paper  circulation. 
The  distress,  ruin  and  bankruptcy  which  now  took 
place  were  universal,  affecting  the  great  interests  both 
of  land  and  trade ;  but  especially  among  landlords, 
whose  estates  were  burthened  by  mortgages,  settle- 
ments, legacies  and  the  like,  the  effects  were  most  . 
marked  and  out  of  the  ordinary  course.    In  hundreds 


The  Finances. 


49 


of  cases,  from  the  tremendous  reduction  which  took 
place  in  the  price  of  land  which  now  took  place,  the 
estates  barely  sold  for  as  much  'as  would  pay  off  the 
mortgages ;  and  the  owners  were  stripped  of  all  and 
made  beggars."1 


1  "  A  Financial,  Monetary  and  Statistical  History  of  England,"  by 
Thomas  I>oubleday,  p.  271.  Mr.  Doubleday  says  further,  in  exemplifica- 
tion of  what  is  said  in  the  text:  "I  was  myself  personally  acquainted 
with  one  of  the  victims  of  this  terrible  measure.  He  was  a  school-fellow, 
and  inherited  a  good  fortune,  made  principally  in  the  West  Indies.  On 
coming  of  age,  and  settling  with  his  guardians,  he  found  himself  pos- 
sessed of  fully  forty  thousand  pounds  ;  and  with  this  he  resolved  to  pur- 
chase an  estate,  to  marry,  and  to  settle  for  life.  He  was  a  young  man 
addicted  to  no  vice,  of  a  fair  understanding,  and  a  most  excellent  heart, 
and  was  connected  with  friends  high  in  rank  and  likely  to  afford  him 
every  proper  assistance  and  advice.  The  estate  was  purchased,  I  believe, 
about  the  year  1812  or  1813,  for  eighty  thousand  pounds,  one  moiety  of 
the  purchase-money  being  borrowed  on  mortgage  of  the  land  bought. 
In  1822-3  he  was  compelled  to  part  with  the  estate  in  order  to  pay  off 
his  mortgage  and  some  arrears  of  interest :  and  when  this  was  done  he 
was  left  without  a  shilling,  the  estate  bringing  only  half  of  its  cost  ia 
1812 !  Thus,  without  imprudence  or  fault  of  any  kind,  was  this  amiable 
man,  together  with  his  family,  plunged  in  irretrievable  and  inevitable 
ruin,  by  the  act  of  a  legislature  which  ought  to  have  protected  both,  and 
which  was  fully  warned  of  the  consequences  of  what  it  was  about  to  do  ; 
but  which,  in  requital,  chose  to  laugh  those  who  warned  to  utter  scorn. 
My  readers  must  not  suppose  that  this  was  either  an  exaggerated  or  un- 
common case.  On  the  contrary,  the  country  teemed  with  similar 
examples,  and  on  the  commencement  of  the  session  of  1823,  the  tables 
of  both  Houses  were  loaded  with  petitions,  detailing  scenes  of  hardship 
and  destitution  appalling  in  the  extreme.  As  a  sample  of  the  whole,  I 
have  selected  one  which  most  fully  exhibits  the  dreadful  effects  of  this 
infatuated  measure  upon  the  welfare  and  happiness  of  the  community; 
and  of  this  petition  I  here  insert  as  complete  an  abstract  as  I  can  frame. 
The  substance  of  this  very  extraordinary  document  was  as  follows.  It 
was  presented  to  the  Commons  by  Lord  Folkstone,  and  to  the  Lords  by 
Earl  Stanhope. 
M  It  sets  forth — 

"  1-  That  the  petitioner,  having  contributed  both  in  purse  and  person  to 
the  maintenance  of  the  state,  had  a  right  to  expect  protection  of  person 

4 


50 


The  Finances.* 


The  Effect  upon  Prices. 
The  distress  was  so  great  and  universal  that  in 
1822,  a  motion  was  made  in  the  House  of  Commons 

and  property  in  return  :  but  that,  instead  of  this,  he  is  ruined  by  an  act 
of  the  Parliament. 

"2.  That  he  imputes  no  intentional  wrong-doing,  but  grievous  error  to 
the  Government ;  yet  he  hopes  the  Government  will  not  change  error 
into  injustice  by  persevering  in  it. 

"  3.  That  the  petitioner's  ruin,  as  well  as  that  of  thousands  of  other 
persons,  arose  from  Peel's  bill  for  returning  to  cash  payments;  but  that 
few  cases  can  exceed  his  in  hardship. 

"4.  That  the  petitioner  and  his  father  were  wine  merchants,  and  made 
a  large  fortune,  with  part  of  which,  in  1811  and  1812,  they  bought  land. 

''5.  That  they  bought  the  estate  of  Northaw,  in  Herefordshire,  for 
62,000/.  and  laid  out  10,000/.  more  in  improvements,  investing  in  all 
72,000J. 

"6.  That  in  1812  they  bargained  with  John  A.  Trenchard,  Doctor  of 
Divinity,  for  the  estate  of  Pontrylas,  for  which  they  agreed  to  give  60,000/., 
paying  5555/.  as  a  deposit.  That  the  title  not  being  satisfactory  the 
result  was  a  suit  at  law,  which  was  not  decided  until  1819.  when  judgment 
went  against  them,  awarding  a  gross  sum  of  71,957/.  195.  bd.  to  Dr. 
Trenchard.  being  purchase-money  and  interest. 

"  7.  That  in  the  meantime  petitioners  had  experienced  heavy  losses 
in  trade,  and  could  not  pay  this  sum  ;  and,  therefore,  gave  Dr.  Trenchard 
a  mortgage  on  both  the  estates  of  Northaw  and  Pontrylas  for  65,000/. 

"8.  That  after  1819,  when  the  suit  ended,  petitioner  and  his  father 
paid  5000/.  in  part  of  the  debt,  and  8000/.  interest  up  to  1821. 

"  9.  That  on  the  suit  ending  in  1819,  they  received  up  to  1821,  out  of 
the  estate,  for  rent  and  wood,  3410/. 

"10.  That  in  July  1821,  the  two  estates  were  offered  for  sale,  but 
would  not  bring  the  sum  for  which  they  were  mortgaged. 

"  11.  That  in  1821  petitioner  and  his  father  were  bankrupts. 

"  12.  That  Dr.  Trenchard  then  got  possession  of  both  estates,  and  gave 
notice  to  foreclose  the  mortgage. 

"  13.  That  petitioner  and  his  father  thus  actually  paid  Trenchard 
18,555/.,  and  have  only  received  out  of  the  estate  3410/.:  and  they  are 
now  about  to  lose  both  the  estates  of  Pontrylas  and  Northaw  ;  the  last 
of  which  cost  72,000/. 

"14.  That  Trenchard,  on  the  other  hand,  has  received  in  cash  18,555/. 
with  all  the  rents  of  Pontrylas  from  1812  to  1819,  and  that  he  is  now 


The  Finances,  51 

for  a  committee  to  consider  the  effect  of  the  "  Act  for 
Resumption  on  the  Agriculture,  Commerce  and  Manu- 

about  to  get  the  two  estates,  with  all  arrears  of  rent  from  February  1820 
in  lieu  of  his  debt  of  60,000?. 

"15.  That  petitioner's  assignees  are  praying  the  Court  of  Chancery 
not  to  allow  this ;  for  that,  if  it  be  granted,  the  result  will  be  that  Dr. 
Trenchard  will  have  received  all  the  rents  and  profits  of  Pontrylas  estate, 
except  for  two  years,  1470Z.  for  timber,  18,5557.  in  cash  from  the  peti- 
tioner, and  in  addition  to  his  own  original  estate  of  Pontrylas?  he  will 
also  have  got  the  other  estate  of  Northaw,  which  cost**! 2,0007. 

"16.  That  petitioner  and  his  father  had  other  estates  in  Middlesex, 
Essex,  and  Hampshire,  which  cost  36,0007.,  but  have  now  been  sold  for 
12,0007. !  That  by  the  depression  in  trade  they  became  bankrupts.  That 
petitioner's  father  died  in  1822,  of  a  broken  heart,  and  that  he  is  himself 
a  ruined  man,  with  seven  children  of  his  own,  ten  of  his  brother's,  and 
seven  of  his  sister's,  all  depending  on  him. 

?'  17.  That  petitioner,  therefore,  prays  for  an  equitable  adjustment  of 
this  and  all  similar  contracts. 

"  This  petition  was  that  of  Charles  Andrew  Thompson,  of  Chiswick,  in 
the  county  of  Middlesex,  and  is  certainly  calculated  to  tear  in  pieces, 
almost,  the  heart  of  every  just  and  sensible  man  that  reads  it.  What 
effect  it  produced  upon  Peel,  Ricardo,  and  the  Houses  I  cannot  say  ;  but 
the  country  throughout  was  in  a  state  of  deep  agitation,  and  remonstrance 
after  remonstrance  poured  in  upon  the  legislature." 

In  1822  the  number  of  land-owners  in  England  was  165,000  ;  in  1861, 
according  to  the  census  of  that  year,  30,766  persons  (15,131  men  and 
15.635  women)  were  the  owners  of  the  whole  land  surface  of  England  ! — 
that  is,  says  Professor  Kirk  in  his  little  volume  called  "  Social  Politics, " 
"  one  land-holder  to  every  652  persons.  That  is,  one  human  being  has  the 
power,  if  he  so  chooses,  to  deny  space  on  the  earth's  surface  to  652  of 
his  fellow-men.  This  does  not  put  the  matter  so  strongly  as  it  would 
stand  if  we  had  the  means  of  showing  in  how  few  hands  by  far  the 
largest  portion  of  the  soil  is  held.  The  matter  was  still  worse  in  Ire- 
land, where  8412  in  a  population  of  5,798,967  held  the  ownership  of  all 
the  lands,  while  in  Scotland  it  was  even  more  deplorable  than  in  Ireland ; 
2975  persons  at  that  time,  held  all  the  lands  of  that  country  ;  which  was 
one  land-owner  to  every  1030  other  persons!"  "  But  this  is  as  noth- 
ing,'' says  Professor  Kirk,  "  when  we  remember  that  about  half  of 
the  whole  Kingdom  is  owned  by  not  more  than  twelve  persons  !" 
Social  Politics,  pp.  35,  36.  How  this  tremendous  concentration  of  land 
in  the  hands  of  the  few  was  brought  about  is  in  part  explained  by  the 
extract  from  Mr.  Doubleday's  book. 


52 


The  Finances, 


factures  of  the  Kingdom."  In  the  course  of  the  debate 
upon  that  motion  Mr.  Attwood  (the  member  for  Bor- 
ough-Bridge)— the  same  unbelieving  gentleman  who 
had  been  induced  to  withdraw  from  the  House  in  1819 
that  the  vote  for  resumption  might  be  unanimous — 
made  a  speech,  in  the  course  of  which  he  said :  "  In 
the  year  1818  the  average  price  of  wheat  was  84s.  per 
quarter;  and  if  the  present  price  be  taken  at  47s.,  that 
is  a  reduction  on  wheat  of  37s.,  which  is  equal  to  a  fall 
of  45Z.  in  every  100Z.,  or  forty-jive  per  cent.  The 
price  of  iron  in  the  year  1818  appears  to  have  been 
13Z. ;  that  price  is  now  SI.  per  ton,  and  is  equal  to  a 
reduction  of  about  forty  per  cent.  The  price  of  cotton 
in  1818  was  Is.,  and  it  has  sunk  to  pd.  per  pound, 
which  is  a  fall  of  fifty  per  cent,  on  cotton.  Wool  in  the 
year  1818  sold  for  2s.  Id.  which  now  sells  for  Is.ld.,  and 
there  is,  therefore,  in  wool  a  fall  of  nearly  fifty  per 
cent.  The  fall  that  has  taken  place,  therefore,  since 
1818  in  iron,  in  cotton  and  in  wool,  is  as  great  as  the 
fall  in  wheat.  These  are  the  great  staples  of  com- 
merce, and  the  average  of  the  fall  upon  all  three  is 
forty-five  per  cent.,  being  exactly  the  reduction  in 
grain.  This  is  recommended  to  the  consideration  of 
those  who  tell  us  of  over-production  and  an  excessive 
cultivation  of  corn-land.  But  I  refer  also  to  a  table 
compiled  by  Mr.  Tooke,  which  contains  a  list  of  the 
principal  articles  of  commerce  and  manufactures, 
thirty  in  number,  which  exhibits  the  same  fall  of  forty- 
five  per  cent,  in  all  the  articles  except  indigo,  the  price 
of  which  has  been  sustained,  as  I  am  informed,  by 
circumstances  of  an  exceptional  kind.  The  fall,  there- 
fore, is  not  peculiar  to  the  products  of  agriculture,  but 


The  Finances. 


53 


is  universal  and  has  embraced  every  article  of  industry 
and  every  article  of  commerce. 

"  This  fall  of  prices  must  have  been  produced  by 
one  of  two  causes :  either  the  quantity  of  all  commo- 
dities has  increased,  or  the  quantity  of  all  money  has 
diminished.  One  of  these  must  of  necessity  have 
occurred,  for  the  proportion  is  altered.  Are  we  to 
believe  that  great  changes  have  suddenly  taken  place 
in  the  productive  powers  of  nature  or  the  resources  of 
art,  so  as  to  account  for  this  sudden  and  universal  fall 
in  prices  ?  Is  it  likely  that  production  in  all  the 
branches  of  industry,  agricultural  and  manufacturing, 
would  go  on  for  three  years  constantly  increasing  in  the 
presence  of  a  constantly  diminishing  price  ?  Evidently, 
it  is  not  so.    *    *  * 

"  In  the  midst  of  this  fall  of  prices,  what  operation 
in  business  could  proceed  without  loss  or  ruin  ?  There 
has  been  no  form  in  which  the  capital  of  the  merchant 
none  in  which  the  capital  of  the  manufacturer,  could 
be  invested  without  the  half  of  it  being  sacrificed 
during  this  calamitous  period.  We  have  been  thrown 
back  upon  a  condition  of  society  in  which  all  industry 
and  enterprise  have  been  rendered  pernicious  or  ruin- 
ous ;  and  where  no  property  is  safe  unless  hoarded  in 
the  shape  of  money  or  lent  to  others  on  a  double  se- 
curity." 

Denials. 

The  friends  of  resumption  denied  that  the  great  fall 
in  prices  was  due  to  a  contraction  of  the  currency. 
They  had  vehemently  insisted  prior  to  the  passage  of 
Peel's  bill,  that  excessive  issues  were  the  cause  of  high 
prices  and  refused  to  stand  by  the  logic  of  that  position 


54 


The  Finances. 


(which  was  of  course  the  true  one)  by  admitting  that 
low  prices  must  result  from  extensive  contraction. 
The  paper-money  advocates  stood  upon  a  similar  false 
ground  ;  they  had  refused  to  admit  that  expansion  was 
the  cause  of  depreciation  and  high  prices,  but  were 
swift  to  charge  that  excessive  contraction  was  the  cause 
of  low  ones ! 

"  Over-Production." 

The  bullionists  said  that  the  prevailing  distress  was 
due  to  "  over-production  "  and  "  under-consumption  ;  " 
phrases  which  Mr.  Baring  justly  denounced  as  trash. 

"  That  a  general  reduction  in  the  price  of  all  com- 
modities," says  Mr.  Joplin,1  "  amounting  to  nearly 
one-half,  should  take  place  in  three  or  four  years  from 
increased  production,  was  inconsistent  with  all  experi- 
ence ;  and  it  would  not  only  have  been  generally 
known  as  the  cause  had  it  been  true,  but  it  would 
have  been  felt  as  beneficial.  If  people  had  found 
themselves  poorer  in  money  they  would  have  been 
richer  in  money's  worth — in  the  necessaries  and  luxu- 
ries of  life. 

"The  idea,  however,  that  things  were  cheaper  from 
abundance  alone  was  confined  chiefly  to  speculative 
inquirers,  and  did  not  extend  to  producers.  The 
agriculturists  in  particular,  by  whom  excessive  produc- 
tion would  be  more  easily  traced,  had  it  occurred, 
were  unable  to  account  for  the  fall  on  any  such  princi- 
ple. 

"  But  those  appearances  which  were  unaccountable 
on  the  one  principle  were  the  natural  result  of  the 

1  "  History  and  Analysis  of  the  Currency  Question,"  by  T.  Joplin, 
p.  73. 


The  Finances. 


55 


other.  If  the  fall  was  produced  by  a  contraction  of 
the  currency  it  would  become  general  and  present  the 
results  which  Mr.  Attwood  pointed  out.  Hence  it  was 
rendered  clear  by  that  gentleman  that  the  fall  did  pro- 
ceed from  the  operation  of  the  currency.  His  argu- 
ment was  wiansviered  and  unanswerable." 

The  Effect  upon  the  Public  Revenues. 
In  the  eight  years  between  1815  and  1821  (and 
those  years  inclusive)  the  British  Exchequer  applied  in 
reduction  of  national  debt  $640,000,000;  in  the  ten 
years  succeeding  only  $245,000,000  were  so  applied ; 
and  in  the  next  ten  years  there  was  a  deficiency  in 
revenue  and  an  increase  in  debt  amounting  to  more 
than  thirty  millions  of  dollars.  William  Cobbett  said 
that  one  effect  of  the  resumption  would  be  to  make 
the  national  debt  permanent;  and  fifty  years  of  ex- 
perience seems  to  verify  his  prediction. 

T/ie  Political  Effects. 
The  political  effects  of  the  prevailing  distress  were 
extraordinary.  Great  meetings  were  held  throughout 
England  and  Scotland  during  the  whole  of  the  summer 
of  1819;  and  on  the  16th  of  August,  60,000  people— 
among  them  women  and  children — assembled  at  Peter- 
loo  near  Manchester,  and  a  collision  took  place  between 
the  crowd  and  the  troops  called  there  to  preserve  the 
peace,  in  which  a  number  of  persons  were  killed  and 
many  wounded.  This  affair  created  everywhere  a 
prodigious  excitement,  and  meetings  were  held  at  Bir- 
mingham and  Leeds,  in  Westminster,  York,  Liverpool 
and  Bristol,  attended  by  great  multitudes,  who  carried 


56 


The  Finances. 


flags  inscribed  with  the  word  "  vengeance."  A  serious 
riot  occurred  at  Paisley  and  another  at  Ely ;  and  the 
government  was  compelled  to  resort  to  military  meas- 
ures for  the  preservation  of  the  public  peace.  In  1820 
the  "Cato  Street  Conspiracy"  was  discovered;  the 
design  of  which  was  the  murder  of  all  the  King's 
Ministers,  and  it  was  frustrated  only  through  the 
cowardice  of  one  of  the  gang  of  conspirators  who  be- 
trayed his  associates.  Military  training  went  on  among 
the  disaffected  in  various  parts  of  the  country  during 
this  year  (1820),  and  a  general  uprising  among  the 
workmen  was  apprehended.  A  large  military  force 
was  provided  to  meet  these  alarming  symptoms.  "  On 
Sunday  morning,  the  2d  of  April,"  says  Sir  Archi- 
bald Alison,1  "  a  treasonable  proclamation  was  found 
placarded  all  over  the  streets  of  Glasgow,  Paisley, 
Stirling  and  the  neighboring  towns  and  villages,  in  the 
name  of  a  provisional  government  calling  on  the  people 
to  desist  from  labour ;  on  all  manufacturers  to  close 
their  workshops ;  and  on  all  the  friends  of  their  country 
to  come  forward  and  effect  a  revolution  by  force,  with 
a  view  to  the  establishment  of  an  entire  equality  of 
civil  rights.  Strange  to  say,  this  proclamation,  unsigned 
and  proceeding  from  an  unknown  authority,  was  widely 
obeyed.  Work  immediately  ceased  ;  the  manufactories 
were  closed  from  the  desertion  of  workmen ;  the  streets 
were  filled  with  anxious  crowds  eagerly  expecting  news 
from  the  South  ;  the  sounds  of  industry  were  no  longer 
heard,  and  two  hundred  thousand  persons  in  the  busiest 
districts  of  the  country  were  thrown  into  a  state  of 
compulsory  idleness  by  the  mandates  of  an  unseen 


1  ••History  of  Europe,'''  Second  Series,  Chapter  X. 


The  Finances. 


57 


and  an  unknown  power."  The  Government  took 
prompt  action  in  this  serious  conjuncture,  and  in  th£, 
course  of  a  few  days  assembled  5000  volunteers  in 
Glasgow — of  whom  2000  were  horse — with  eight  guns. 
These  preparations  overawed  the  insurgents,  and  no 
dangerous  outbreak  occurred.  Three  of  the  ringlead- 
ers were  executed,  however,  and  seven  or  eight  were 
transported. 

The  Government,  warned  by  these  events,  increased 
its  precautions,  and  before  the  end  of  the  year  had 
augmented  the  volunteer  force  to  35,000  men.  "  With- 
out doubt,"  continues  Sir  A.  Alison,  "  this  powerful 
volunteer  force,  organized  especially  in  the  manufac- 
turing districts  at  this  period,  and  the  decisive  demon- 
stration it  afforded  of  moral  and  physical  strength  on 
the  part  of  the  Government,  was  the  chief  cause  through 
which  Great  Britain  escaped  an  alarming  convulsion." 
This  was  done,  however,  at  a  very  considerable  ex- 
pense :  a  million  and  a  half  a  year. 

Culmination  of  the  Distress. 
"  But  the  material  distresses  had  increased  and  were 
increasing  with  a  rapidity  which  outstripped  all  calcu- 
lation, and  had  now  reached  a  height  which  compelled 
investigation  and  threatened  to  bear  down  all  opposi- 
tion. The  great  fall  in  the  price  of  the  whole  articles 
of  agricultural  produce  which  had  gone  on  without 
intermission  from  the  monetary  bill  of  1819,  and  had 
now  (1822)  reached  fifty  per  cent,  upon  every  product 
of  rural  labour,  had  spread  at  length  to  every  other 
species  of  manufacture.  All,  sharing  in  the  influence 
of  the  same  cause,  exhibited  the  same  effect.  The 


58  The  Finances. 

long  continuance  of  the  depression  and  its  universal 
application  to  all  articles  of  commerce,  excluded  the 
idea  that  it  was  owing  to  a  glut  in  the  market,  or  to 
any  excess  of  trading  in  particular  lines  of  business, 
and  furnished  a  valuable  commentary  on  the  predic- 
tions of  Mr.  Ricardo  and  Mr.  Peel  that  the  change  of 
prices  could  not  by  possibility  exceed  three  per  cent. 
The  subject  accordingly  engaged  the  repeated  and 
anxious  consideration  of  both  Houses  of  Parliament, 
and  was  made  the  topic  of  frequent  and  luminous 
debates  of  the  highest  interest  and  importance,  and  at 
length  forced  a  change  of  the  utmost  moment  in  our 
monetary  system."  1 

"A  Change  of  the  Utmost  Moment. 
Prior  to  the  suspension  of  cash-payments  by  the 
Bank  of  England  the  Bank  had  not  been  allowed  to 
issue  notes  of  a  less  denomination  than  5/.  (or  $25) 
just  as,  for  a  period  after  the  United  States  supplied 
the  currency  of  the  country,  the  Federal  Treasury  was 
not  allowed  to  issue  notes  of  a  less  denomination  than 
five  dollars.  But  this  limitation  upon  the  Bank  was 
attended  with  serious  practical  inconveniences,  and 
was  at  length  repealed  and  the  Bank  was  permitted 
to  issue  notes  as  low  as  11.  (or  $5).  The  effect  of  this 
authorization  was  that  very  soon  a  large  proportion  of 
the  circulation  was  in  one-pound  notes.  By  Peel's 
bill  of  1819  the  privilege  of  issuing  these  small  notes 
was  withdrawn  both  from  the  Bank  of  England  and 
the  country  banks  ;  and  it  was  the  necessity  of  sup- 


1  "  History  of  Europe,"  Second  Series,  Chapter  X. 


The  Finances. 


59 


plying  a  large  fund  of  coins  to  replace  the  small  note 
circulation,  thus  driven  out  of  existence,  that  was  one 
great  cause  of  the  contraction  of  the  currency. 

The  act  by  which  this  requirement  of  Peel's  bill  of 
1819  was  repealed  was  on  the  2d  of  July  1822  intro- 
duced into  Parliament  by  Lord  Londonderry,1  "who," 
said  Sir  James  Graham,  "  did  not  treat  the  question  as 
one  of  a  fluctuation  of  prices,  or  want  of  means  of  con- 
sumption, or  of  superabundant  harvest.  Lord  London- 
derry said  plainly  and  directly,  6  this  is  a  question  of 
currency  ;  the  currency  of  the  country  is  too  contracted 
for  its  wants  and  our  business  is  to  apply  a  remedy.' " 

Lord  Londonderry's  bill  permitted  the  issue  of  one 
and  two  pound  notes  for  a  period  of  ten  years  longer, 
and  made  the  one-pound  notes  of  the  Bank  of  England 
a  legal  tender  everywhere  except  at  the  office  of  the 
Bank  itself  "  This  Act,"  says  Sir  A.  Alison,  "  coupled 
with  the  grant  of  4,000, 000Z.  Exchequer  bills,  which 
Government  was  authorized  to  issue  in  aid  of  the  agri- 
cultural interest,  had  a  surprising  effect  in  restoring 
confidence  and  raising  prices;  and  by  doing  so,  it 
repealed  so  long  as  it  continued  in  operation  the  most 
injurious  parts  of  the  Act  of  1819."  For — although 
the  Bank  of  England  did  not  avail  of  the  privilege  of 
the  Act — the  country  banks  issued  the  small  notes 
profusely,  and  thus  extensively  and  at  once  relieved 
the  pressure  upon  the  community,  as  was  manifested 
by  the  prompt  revival  of  industry  and  trade  throughout 
the  whole  kingdom. 


1  A  member  of  the  then  existing  Cabinet. 


60 


The  Finances. 


The  Conclusion  of  this  Matter- 
These  are,  in  as  brief  detail  as  it  has  been  possible 
for  me  to  compress  them,  the  more  important  circum- 
stances attending  upon  the  resumption  of  cash  pay- 
ments by  the  Bank  of  England  and  the  country  banks 
of  Great  Britain  in  1819-1821.  They  have  a  great 
interest  for  our  people  at  this  time,  for  they  are  types 
of  the  calamities  which  will  surely  result  from  prema- 
ture action  in  the  direction  of  resumption  among  our- 
selves. The  commercial  and  credit  systems  of  Great 
Britain  and  the  United  States  are  so  exactly  identical 
in  all  important  particulars  and  almost  in  minute 
detail,  that  there  is  no  fact  or  consequence  in  English 
financial  history  which  has  not  an  important  bearing 
upon  our  own  action. 

Whether  our  rulers  will  profit  by  the  disastrous 
experiences  of  Great  Britain,  remains  to  be  seen  :  but 
I  confidently  predict,  that  the  party  Democratic  or  Re- 
publican or  any  other  ichatever  its  name,  which  forces 
a  resumption  of  specie  payments  prior  to  the  practical 
extinction  of  the  national  debt,  whether  that  be  in  ten 
years  or  thirty,  will  be  trampled  to  death  under  the  feet 
of  the  people.  Let  the  events  of  the  future  approve  or 
condemn  me  for  saying  this  thing ! 

An  Important  Question. 
.  At  what  volume  of  paper  circulation  can  specie  pay- 
ments in  the  United  States  be  safely  resumed  and 
sustained  ?  This  is  a  question  of  the  weightiest  concern 
to  every  commercial  and  industrial  interest  in  the 
country. 

There  seems  to  be  a  pretty  general  concurrence 


The  Finances. 


61 


among  writers  upon  finance  that  the  coin  provided  for 
redemption  should  not  be  less  than  33  per  cent,  of  the 
circulating  notes  to  be  redeemed.  But  experience 
warns  us  that  a  coin  reserve  of  33  per  cent,  is  not 
adequate  to  all  the  monetary  exigencies  to  which  com- 
mercial countries  are  subject.  Three  times  since  1844: 
the  Bank  of  England  has  been  upon  the  very  verge 
of  suspension,  with  a  specie  reserve  approximating 
more  nearly  to  one-half  than  to  one-third  of  the  note 
circulation !  and  it  is  strictly  within  the  range  of  pos- 
sibility, as  experience  proves,  that  a  bank  with  an 
outstanding  note  circulation  of  one  million  of  dollars, 
and  a  specie  reserve  of  three-quarters  of  a  million,  and 
a  deposit  account  of  a  million  and  a  half,  might  be 
bankrupted  without  being  called  upon  to  redeem  a 
thousand  dollars  of  its  circulating  notes.  On  the  3d 
of  December  1847  Mr.  Francis  Baring  made  a  speech 
in  the  British  Commons  in  the  course  of  which  he  said, 
;<  That  the  amount  of  bullion  in  the  Bank  of  England 
on  the  12th  of  September  1846  was  $81,770,000,  and 
that  on  the  17th  of  April  1847  it  was  reduced  to 
$46,650,000;  being  a  diminution  of  $35,120,000  (or 
nearly  one-half).  Taking  the  same  dates  with  respect 
to  the  circulation  of  notes  it  was  found  that  on  the 
12th  of  September  the  amount  outstanding  was 
$104,910,000,  and  on  the  17th  of  April  1847  the 
amount  outstanding  was  $106,240,000,  being  an  in- 
crease of  $1,230,000  !"  From  which  it  appeared  that 
while  the  specie  in  the  Bank  had  been  reduced  in 
amount  over  $35,000,000,  the  note  circulation  had 
increased  nearly  a  million  and  a  quarter  !  the  explana- 
tion of  which  was  very  simple  and  obvious,  though 


62 


The  Finances. 


Mr.  Baring  did  not  hesitate  to  say  that  he  had  never 
entertained  the  idea  that  such  a  thing  was  possible. 

But  if  it  be  admitted  that  a  coin  reserve  of  33 
per  cent,  is  a  safe  one,  the  inquiry  recurs  at  what 
volume  of  paper  circulation  can  we  resume  and  sustain 
a  safe  condition  of  specie  payments.  The  present  legal 
tender  circulation  is  $382,000,000  and  the  authorized 
National  Bank  circulation  is  $354,000,000 ;  added  to 
these  are  about  $40,000,000  of  fractional  currency  : 
making  a  total  of  $776,000,000.  It  is  obviously  cer- 
tain that  no  resumption  is  possible  upon  so  vast  a 
superstructure  of  paper ;  and  it  is  equally  certain  that 
we  could  not  resume  if  the  currency  were  reduced  a 
hundred  millions  lower;  for  in  November  1867  Mr. 
McCulloch  had  contracted  it  down  to  $688,000,000,  and 
so  far  as  the  practicability  of  the  thing  was  concerned 
we  were  as  far  from  resumption  then  as  we  are  now. 
Without  multiplying  words,  we  must  reduce  the  paper 
circulation  to  a  sum  not  in  excess  of  that  authorized 
to  be  issued  by  the  National  Banks,  and  I  do  not  for  a 
moment  believe,  even  if  we  should  exhibit  the  fortitude 
necessary  to  resumption  upon  that  relatively  small 
amount  of  notes,  that  we  could  sustain  it.  The  whole 
bank-note  circulation  of  the  British  Empire  was  in 
1872  slightly  over  $218,000,000,  and  the  metallic 
circulation  was  at  the  same  time  $520,000,000 ;  and 
jet,  says  Mr.  Patterson,1  "  when  the  stock  of  gold  in 
the  Bank  of  England  is  at  its  ordinary  sum  (say  about 
$^0,000,000),  the  export  of  ten  or  fifteen  millions  of 
gold  suffices  to  produce  a  dearth  of  money  and  a  serious 
commercial  crisis.".    If,  therefore,  such  serious  conse- 


1  "  Science  of  Finance,"  p.  200. 


The  Finances. 


63 


quenqes  are  possible  to  result  in  a  country  where  the 
whole  note  circulation  is  but  $218,000,000,  and  the 
supply  of  the  precious  metals  is  so  great  as  five  hun- 
dred millions  or  more,  what  is  to  be  apprehended  in 
America  where  it  is  proposed  to  have  a  convertible 
note  circulation  of  $354,000,000?  But  the  example 
of  England  is  not  the  only  one  which  offers  us  warning; 
for  Mr.  Tooke  has  shown  that  in  1855  and  1856  the 
Bank  of  France  resorted  to  extraordinary  measures  to 
sustain  itself,  even  though  its  coin  reserve  was  at  no 
time  less  than  one-third  its  circulation.  The  condition 
of  the  Bank  in  January  1854  was  this — circulation 
$130,000,000  ;  bullion  $60,000,000.  Between  this  last 
named  date  and  the  12th  of  May  subsequent  the  bullion 
had  increased  to  $80,000,000  with  no  change  in  the 
circulation.  In  October  1855  the  note  circulation  still 
remaining  at  one  hundred  and  thirty  millions  the 
bullion  had  fallen  to  $45,000,000 ;  March  31st  1856 
the  circulation  had  fallen  to  $125,000,000  and  the 
bullion  to  $42,000,000.  In  October  of  the  same  year 
the  sum  of  the  bullion  had  fallen  to  $32,000,000  ;  and 
meantime,  between  the  1st  of  July  1855  and  the  11th 
of  December  1856,  the  Bank  had  purchased  and 
imported  into  France  gold  to  the  amount  of  $136,- 
000,000  !  at  premiums  amounting  to  over  two  mil- 
lions. During  the  whole  period,  although  the  paper 
circulation  was  substantially  stationary,  the  specie 
procured  by  the  novel  means  just  recited  was  drawn 
from  the  vaults  of  the  Bank  and  exported  as  rapidly 
as  it  was  brought  in  !  and  all  this  notwithstanding  the 
well-known  fact  that  the  metallic  circulation  of  the 
country  at  this  very  time  was  not  less  than  five  hun- 


64 


The  Finances. 


dred  millions.  From  which  it  is  not  difficult  to  see 
that  if  the  Bank  had  been  subjected  to  a  "  run"  or 
any  even  unusual  demand  for  redemption  of  its  circu- 
lating notes,  in  addition  to  the  other  demands  made 
upon  it,  suspension  would  have  become  inevitable. 

"  And,  moreover,''  remarks  Mr.  Tooke,  "  the  pro- 
ceedings (of  the  Bank  of  France  in  thus  buying  coin 
in  and  importing  it  from  foreign  countries)  excited 
notice ;  and  the  directors  of  the  Bank  of  England  were 
not  backward  in  protecting  their  own  establishment,  not 
merely  by  raising  the  rate  of  discount  in  order  to  render 
the  Paris  operation  more  costly ;  but  also  by  adopting 
other  precautions  against  the  class  of  bills  known  or  be- 
lieved to  be  employed  as  a  means  of  artificially  with- 
drawing  gold  to  the  Bank  of  France!' 

No  doubt  under  our  National  Banking  system  we 
might  support  at  a  coin  level  a  larger  note  circulation 
than  is  possible  either  in  France  or  in  England,  but  it 
is  not  doubtful  that  so  vast  a  superstructure  as 
$354,000,000  of  notes  would  require  a  solider  founda- 
dation  than  $120,000,000  of  specie. 

But  if  we  admit  that  so  improbable  a  thing  may  be, 
we  create  an  extraordinary  demand  for  $120,000,000 
of  gold  ;T  and  as  the  fractional  currency  must  also  be 
replaced  by  small  coins  for  the  current  "small  change," 
we  may  estimate  that  the  whole  demand  for  gold  and 
silver,  within  say  three  years,  may  be  stated  thus  : 

1  But  a  demand  for  one  hundred  and  twenty  millions  of  gold,  is,  in 
accordance  with  well-known  laws,  equivalent  to  a  demand  for  twice  as 
great  a  sum.  I  assume  also  that  when  resumption  is  determined  upon 
the  period  within  which  it  is  to  be  accomplished  cannot  safely  be  pro- 
tracted beyond  three  years. 


The  Finances. 


65 


For  redemption  of  notes,  $120,000,000 

In  substitution  for  fractional  currency,        .        .      .  20,000,000 

Total,  $140,000,000 

No  one  will  contend  that  we  can  safely  provide  a 
less  sum  than  this  in  addition  to  the  stock  already  in 
the  country,  which  may  be  stated  as  not  exceeding 
2-  $1/0,000,000. 

What  will  be  the  effect  of  a  demand  for  one  hundred 
and  forty  millions  of  gold  coin  or  bullion  within  a 
period  of  three  years? — for  certainly,  when  we  once 
begin  the  process  of  resumption  it  will  have  to  be 
short  and  energetic  in  accomplishment  if  it  is  to  be 
accomplished  at  all.  I  will  attempt  to  show  the  effect 
by  contrast,  and  I  select  the  pig-iron  interest  of  the 
country  as  the  one  best  adapted  to  the  purposes  of  my 
illustration  : 

The  whole  product  of  pig  iron  in  the  United  States 
in  1873  was  2,868,000  tons.  The  number  of  stacks 
in  blast  on  the  1st  of  January  1874  was  410,  and 
if  this  was  the  average  number  in  blast  during  the 
preceding  year,  it  would  imply  that  the  number  of 
workmen  employed  was  forty-one  thousand,  reckoning 
100  men  (including  workers  in  the  mines)  as  the 
average  to  each  stack.  •  The  whole  number  of  stacks 
in  twenty-five  states  on  the  31st  of  December  last  was 
662,  with  an  estimated  productive  capacity  of  4,500,000 
tons  per  year;  and  if  all  were  in  blast  up  to  their 
supposed  powers  they  would  employ  66,000  workmen. 
The  estimated  value  of  the  entire  product  for  1873 
was  $118,000,000. 

Suppose  now  a  demand  should  arise  for  an  in- 
creased product  of  pig  iron  of  a  million  and  a  quarter 
5 


G6 


The  Finances. 


tons  per  annum  within  say  three  years  and  worth  in 
the  aggregate  say  $140,000,000  :  what  would  be  the 
effect  ?  It  would  act  as  an  instant  stimulus  not  only 
to  the  pig-iron  industry  but  there  is  no  industry  in  all 
the  land  which  would  not  feel  its  life-giving  impulse. 
There  would  be  no  contraction  of  the  currency  but  a 
rise  in  the  value  of  it  even  at  its  extended  volume ;  it 
would  bring  into  active  use  all  that  portion  of  our  circu- 
lation which  is  now  hoarded  and  dormant ;  it  would 
give  an  instant  activity  to  all  our  commerce ;  the 
banker,  the  merchant,  the  carrier,  the  agriculturist,  the 
labourer — there  is  no  member  of  the  society,  no  matter 
how  humble  his  station,  who  would  not  feel  the  quick- 
ening and  beneficent  influence  of  such  a  demand.  It 
w^ould  be  simply  glorious  :  it  would  put  half  a  million 
people  to  work,  and  the  idleness  and  suffering  of  to-day 
would  be  transformed  into  industrious  activity  and  re- 
joicing to-morrow,  and  there  is  not  a  human  creature 
within  the  borders  of  the  Republic  who  would  not  be 
happier,  for  it  could  not  possibly  inflict  injury  upon 
any  one  but  would  be  a  source  of  good  to  all. 

Let  us  suppose  on  the  other  hand  an  unrelenting 
demand  within  three  years  for  one  hundred  and  forty 
millions  of  gold  and  silver,  or  an  average  say  of  forty- 
five  millions  a  year :  what  would  be  the  effect  of  such 
a  demand  ? 

The  answer  to  this  question  will  depend  upon  the 
uses  to  which  the  metals  are  to  be  devoted. 

If  the  demand  arise  on  the  part  of  goldsmiths  for 
converting  them  into  manufactured  articles,  the  effect 
would  be  a  rise  in  their  value  and  in  their  price  at 
the  same  time  that  it  would  raise  the  value  of  our 


The  Finances. 


67 


currency.  The  reason  is  obvious.  Every  demand 
which  has  for  its  motive  an  additional  industrial 
activity  raises  the  value  of  money. 

But  suppose  a  deficit  in  the  gold-revenues  of  the 
Federal  Treasury  and  a  demand  for  forty-five  millions 
of  coin  each  year  for  three  years  for  the  payment  of 
interest,  say  upon  public  debt :  what  would  be  the 
effect  of  a  demand  of  this  nature  ?  Without  attempt- 
ing to  anticipate  the  measures  the  Government  would 
probably  adopt  in  order  to  procure  the  coin,  I  confine 
my  inquiry  to  the  effect  such  a  demand  would  have 
upon  the  value  of  gold.  No  one  will  doubt,  I  think, 
that  the  known  necessity  of  the  Government  to 
provide  a  hundred  or  more  millions  of  coin  in  each 
year  for  the  payment  of  interest  on  public  debt  exerts 
a  powerful  influence  not  only  in  sustaining  a  premium 
but  in  keeping  it  at  a  figure  at  least  double  what  it 
would  be  if  that  necessity  were  removed.  A  demand 
for  forty-five  additional  millions  in  each  year  would 
certainly  augment  the  current  premium  anywhere 
from  five  to  fifteen  per  cent.  A  demand  for  use  as 
money  would  be  essentially  different  from  the  effect  of 
a  like  demand  for  its  transformation  into  manufactured 
articles,  and  would  not  have  so  stimulating  an  influ- 
ence upon  its  value ;  for  the  reason  that  in  the  first 
instance  the  gold  would  be  wholly  withdrawn  from  use 
as  money,  thereby  raising  the  value  of  the  whole  mass 
remaining  in  circulation,  while  in  the  second  it  would 
only  be  temporarily  diverted  from  its  accustomed 
channels  and  would  soon  be  returned  into  them. 

But  in  neither  of  these  cases  would  there  be  any 
disturbance  in  the  course  or  depreciation  in  the  value 


68 


The  Finances. 


of  our  paper  circulation  ;  on  the  contrary  its  activity 
would  be  increased  and  its  value  enhanced. 

Let  us  now  consider  the  effect  of  a  demand  for  gold 
to  serve  as  a  basis  for  a  convertible  bank-note  circula- 
tion. You  will  allow  me  here  to  call  your  attention 
to  the  most  important  consideration  connected  with 
this  vitally  important  subject  and  one  which  is  per- 
sistently overlooked  by  the  bullionists  (I  may  say  by 
their  opponents  also),  and  yet  its  weight  in  the  deter- 
mination of  the  whole  matter  is  paramount.  I  beg 
you  carefully  to  observe,  then,  that  this  question  of 
resumption  is  not  one  of  a  greater  or  less  premium 
upon  coin  whether  that  premium  be  two  per  cent,  or 
twenty;  nor  is  it  one  of  a  merely  "  inconsiderable 
excess  of  paper-notes."1    But  the  true  question  is  this  : 

1  And  hence  the  statements  made  by  Professor  13onamy  Price  in 
New  York  on  the  evening  of  the  30th  of  November  1874,  that  "the 
history  of  resumption  of  specie-payments  in  England  shows  that  no 
large  previous  accumulation  of  gold  will  be  required  for  the  operation  " 
of  resumption  in  the  United  States,  and  that  the  same  ''history  of  re- 
sumption in  England  and  the  probable  actual  state  (what  is  a  "  probable 
actual  state"?)  of  the  American  currency  relative  to  the  wants  of  the 
American  people  warrant  the  belief  that  the  excess  of  paper-notes  is  not 
considerable  and  will  not  require  a  large  amount  to  be  redeemed  and 
cancelled,"'  are  unsound.  It  might  be  well  for  Prof.  Price  to  define 
what  he  means  by  "no  large  previous  accumulation  "  and  that  "the 
excess  of  paper-notes  is  not  considerable."  In  point  of  fact  the  excess 
of  paper-notes  is  very  considerable,  as  experience  will  infallibly  demon- 
strate when  the  "operation  of  resumption"  is  a  fact  accomplished.  It 
is  four  hundred  million*  or  four  hundred  and  fifty  millions  in  excess 
relatively  to  the  power  of  the  country  to  resume  and  sustain  specie 
payments. 

Prof.  Price  spoke  also  in  commendation  of  the  "Automatic  Currency 
Machine"  in  the  Rank  of  England.  But  the  best  English  authorities — 
and  among  these  I  name  conspicuously  Mr.  Tooke  and  Mr.  Gil  bar  t — 
denounce  that  automaton  as  a  wretched  piece  of  unwisdom.  On  page 
28  ante  of  this  pamphlet  will  be  found  the  statements  of  the  Lords1  Com- 


The  Finances. 


69 


What  is  the  Volume  of  Bank  or  other  Notes  which 
the  country  can  permanently  sustain  upon  a  specie- 
PAYING  foundation  ?  We  must  fix  with  an  approxi- 
mate degree  of  certainty  the  amount  of  paper-notes 
which  can  at  all  times  be  relied  upon  as  instantly  con- 
vertible into  coin.  When  we  have  fixed  this  limit 
we  may  safely  say  we  have  solved  the  question  of  re- 
sumption. Until  we  have  fixed  this  limit  we  can 
safely  say  nothing  of  the  sort. 

You  have  already  seeu  that  the  banks  of  Great 
Britain  with  a  paper  circulation  of  only  $218,000,000 
have  been  surrounded  with  extraordinary  restrictions 
intended  to  secure  the  convertibilitv  of  their  circula- 
ting  notes  under  all  circumstances,  and  that,  notwith- 
standing the  enormous  metallic  currency  of  the  Empire, 
the  drain  of  a  few  millions  is  sufficient  to  excite  a  com- 
mercial crisis ;  and  you  have  seen  also  the  remarkable 
measures  adopted  by  the  Bank  of  France  in  1855  and 
1856  in  order  to  support  a  note  circulation  of  only 
$130,000,000.  [On  the  7th  of  April  1870  not  long 
before  the  breaking  out  of  the  war  between  France 
and  Germany  the  Bank  of  France  had  an  outstanding 
note-circulation  of  $280,000,000  and  held  coin  and 
bullion  to  the  amount  of  $251,000,000.  On  the  5th 
of  October  1871  (after  the  war  was  ended)  the  circu- 
lation of  the  Bank  was  $396,000,000  and  the  coin  and 
bullion  in  its  possession  amounted  to  $125,000,000, 
and  specie-payments  were  suspended.    On  the  23d 

niittee  in  1848  touching  the  practical  working  of  that  act,  and  any  one 
very  deeply  interested  in  the  matter,  who  has  access  to  Mr.  Tooke's 
41  History  of  Prices,"  will  find  in  the  fourth  volume  of  that  invaluable 
book  a  complete  exposition  of  the  whole  operations  of  Peel's  bank 
scheme. 


70  The  Finances. 

of  October  1S73  the  note  circulation  was  §598.000,000 
and  the  specie  §145,000,000,  and  the  Bank  was  still 
under  suspension.  On  the  25th  of  June  1874  the  note 
circulation  was  reduced  to  $495,000,000  and  the  stock 
of  specie  increased  to  $235,000,000.  But  that  "most 
impregnable  organization  of  credit  on  a  grand  scale  the 
world  has  ever  seen,"1  with  a  specie  reserve  approxi- 
mating to  nearly  fifty  percent,  of  its  circulating  notes 
was  not  yet  sufficiently  impregnable  to  resume,, 
although  its  whole  liabilities  for  notes  and  deposits 
were  but  $580,000,000  while  its  means  of  payment 
were  in  specie  $235,000,000,  loans  to  the  government 
$173,000,000  and  private  discounts  $170,000,000: 
total  $578,000,000.  On  the  1st  of  August  last  the 
circulating  notes  of  the  Bank  amounted  to  $510,- 
000,000  and  its  specie  to  $250,000,000.  This  is  a 
very  remarkable  condition  of  affairs  and  illustrates 
that  in  France  at  any  rate  the  question  of  specie- 
payments  is  not  one  of  "a  small  previous  accumu- 
lation of  gold"  nor  yet  of  "an  inconsiderable  excess 
of  paper-notes  !"]  It  will  not  be  thought  dogmatic 
in  view  of  these  examples  to  repeat  my  strong  convic- 
tion (which  i£  warranted  also  upon  the  circumstances 
of  our  commerce,  internal  and  external)  that  we  can 
not  support  a  convertible  circulation  of  $354,000,000. 
M.y  object  at  this  place,  however,  is  to  arrive  approxi- 
mately near  the  aggregate  of  contraction  we  must  un- 
dergo before  resumption  can  be  effected.  If  it  be  con- 
ceded that  a  paper  circulation  of  $354,000,000  can  be 


1  New  York  Tribune  July  13th  1874.  All  these  facts  relating  to  the 
Bank  of  France  are  made  up  from  three  different  articles  that  have 
appeared  in  "  The  Tribune." 


The  Finances. 


71 


sustained  upon  a  specie  foundation,  and  that  a  specie 
reserve  of  33  per  cent,  is  sufficient  to  sustain  it,  we 
come  to  inquire  what  effect  a  contraction  of  four  hundred 
and  twenty  millions  of  dollars  will  have  upon  the  desti- 
nies of  the  country  ?  But  is  it  necessary  to  pursue  an  in- 
quiry based  upon  so  tremendous  a  decrease  in  the  cur- 
rent medium  of  exchange?  The  simple  statement  of 
this  unavoidable  preliminary  to  resumption  involves  all 
the  consequences  of  a  vastly  contracted  production,  of 
an  extensive  and  most  disastrous  fall  in  the  prices  of  all 
commodities  and  of  the  universal  wages  of  labour,  of 
ships  out  of  commission,  mines  closed,  factories  silent, 
storehouses  deserted,  lands  untilled,  working  men  idle  ; 
a  decline  in  the  public  revenues  while  taxation  is  kept 
up  or  increased  to  meet  deficiencies  ;  the  pressure  of 
taxes  and  of  debts  between  man  and  man  doubled, — in 
a  word  suffering  everywhere  and  prosperity  nowhere. 
When  prices  under  this  accumulation  of  calamities  and 
sufferings  shall  have  fallen  below  the  level  of  prices  in 
Europe,  then  gold  and  silver  will  flow  hither  from 
foreign  countries  and  the  products  of  our  own  mines 
will  stop  west  of  the  Atlantic  Main.  It  may  be  even 
profitable  for  foreign  bondholders  to  flood  us  with  our 
own  bonds,  which  will  retard  the  time  of  resumption  ; 
but  sooner  or  later  there  will  of  course  be  an  end  of 
the  agony.  The  banks  meantime  will  hoard  the  pre- 
cious metals  till  they  have  accumulated  a  fund  sufficient 
for  resumption, — but  long  before  all  this  happens,  the 
party  which  confers  upon  the  country  the  blessings  of  a 
convertible  currency  will  be  buried  in  the  grave  out  of 
which  there  is  no  resurrection  !  If  I  am  sure  of  nothing 
else  I  am  sure  of  this. 


72 


The  Finances. 


Now  all  this  may  be  the  merest  declamation  based 
upon  the  most  unwarranted  assumption,  but  it  will  be 
difficult  to  show  that  it  is  so.  Dr.  Johnson  says  that 
experience  is  the  test  of  truth  and  constantly  over- 
throws men's  theories,  and  assuredly  if  anything  has 
been  demonstrated  by  financial  experience  it  is  that  a 
sound  convertible  note  circulation  of  §350,000,000  is 
an  absolute  impossibility  in  any  commercial  country. 
It  is  the  business  of  those  who  say  that  the  question 
of  resumption  is  one  "of  a  small  previous  accumula- 
tion of  specie  "  and  an  "  inconsiderable  excess  of  paper 
notes,"  to  furnish  to  the  people  the  grounds  upon  which 
the}'  rest  their  faith.  Let  them  quit  the  region  of  in- 
definite assertion  and  put  themselves  upon  the  founda- 
tion of  facts,  for  "facts  speak,"  and  the  question  is  too 
vital  to  warrant  us  in  proceeding  upon  mere  speculation. 
We  must  not  cast  anchor  in  the  midst  of  the  clouds. 

But  

But  if  what  precedes  is  warranted  upon  fact,  it 
would  be  the  part  of  wisdom  to  pause  and  take  account 
of  our  surroundings.  Those  who  talk  of  resumption, 
whether  they  be  conductors  of  public  journals  or 
members  of  Congress  or  "political  economists"  or 
party  conventions,  seem  generally  to  concede  that  the 
operation  must  be  effected  so  soon  as  can  be  done 
u  without  injury  to  the  business  interests  of  the  coun- 
try." But  there  never  will  be  a  time  when  we  can  re- 
sume without  more  or  less  injury  and  suffering.  The 
real  business  in  hand  is  to  fix  upon  that  time  when  the 
necessary  evils  which  must  flow  from  resumption  can 
be  reduced  to  the  minimum,  and  when  the  people  will 


The  Finances. 


73 


submit  to  them  with  patience  because  unaccompanied 
by  a  sense  of  public  injustice. 

The  First  Step. 
In  a  pamphlet1  of  mine  printed  recently  (although 
written  nearly  three  years  ago)  I  said  that  the  pay- 
ment of  the  public  debt  was  a  policy  commended  alike 
by  National  Duty  and  by  National  Honour.  The  path 
to  safe  and  permanent  resumption  lies  exactly  in  this 
direction — the  payment  of  the  public  debt.  Aside  from 
the  obligation  the  country  is  under,  upon  general  prin- 
ciples, to  pay  its  debts,  that  obligation  is  doubly  strong 
in  view  of  the  wide  injustice  resumption  would  inflict 
if  effected  before  the  public  debts  are  substantially  ex- 
tinguished. The  reason  is  easily  stated  :  In  I860  the 
people  of  the  United  States  supported  all  their  govern- 
ments— federal,  state  and  municipal — upon  a  taxation 
of  less  than  two  hundred  millions  of  dollars,  but  in 
1S70  the  aggregate  taxation  was  six  hundred  and 
ninety-one  millions  !  a  difference  of  nearly  five  hundred 
millious  of  dollars :  that  is  to  say.  more  than  one-ninth 
or  between  eleven  and  twelve  per  cent,  of  the  whole 
income  of  the  country  is  extracted  from  the  people  for 
the  support  of  government  and  payment  of  interest  on 
public  debt!  There  is  no  reason  to  suppose  that  the 
taxes  are  less  now  than  they  were  in  1S70,  but  there 
is  very  solid  ground  for  the  belief  that  they  are 
greater ;  and  they  are  exclusive  of  the  support  of 
churches,  private  charities  and  private  schools  :  nor  is 

1  MA  Brief  Account  of  the  Finances  and  Paper-Money  of  the  Revo 
lutionary  War:"'  John  Campbell  £  Son.  publishers,  74u  Sansom  street, 
Philadelphia. 


74 


The  Finances. 


there  the  slightest  ground  for  expectation  that  under  a 
specie-paying  system  the  taxes  would  be  at  all  reduced 
in  amount.  What  is  certain  is,  that  their  pressure 
would  be  enormously  increased — perhaps  even  doubled. 

It  seems  very  clear,  then,  that  specie-payments 
cannot  now  be  resumed  without  inflicting  the  most  op- 
pressive injustice  upon  tax-payers. 

The  duty  of  paying  our  public  debts  cannot  be  too 
strongly  urged.  It  is  the  point  cVappui  from  which 
all  operations  towards  specie-payments  must  diverge. 
Surely,  when  the  pressure  of  the  taxes  is  reduced  from 
between  eleven  and  twelve  per  cent,  to  four  or  five  per 
cent.,  the  loss  and  suffering  incident  to  resumption  will 
be  immensely  lessened,  and  the  people  will  bear  the 
hardships  which  the  surgery  of  resumption  will  in- 
fallibly inflict  with  greater  fortitude  because  unac- 
companied, as  I  have  already  said,  with  a  sense  of 
public  injustice  and  oppression. 

It  is  not  worth  while  to  enlarge  upon  the  effects  of 
resumption  upon  debts  of  private  corporations  and 
between  man  and  man.  It  will  be  time  enough  to 
talk  about  them  when  they  begin  to  be  felt ;  and  Con- 
gressional supporters  of  specie-payments,  who  desire 
continued  public  service,  will  have  lively  times  in  ex- 
plaining to  those  whose  suffrages  they  seek  the  subtle 
operations  of  "over-production"  and  of  "under-con- 
sumption."  The  people  will  perfectly  understand  the 
latter  but  will  doubtless  ask  information  respecting 
the  former ! 


The  Finances. 


75 


What  Ought  to  he  Done. 
The  continued  depression  of  industry  and  commerce 
is  due  not  to  financial  disorder  but  to  financial  uncer- 
tainty. The  clamours  of  impracticable  hard-money 
men  and  of  impracticable  inflationists  are  equally 
effective  to  retard  the  restoration  of  the  confidence 
which  is  so  necessary  to  the  revival  of  credit.  There  is 
abundance  of  money  for  all  our  uses,  and  if  resump- 
tion be  now  impossible  on  one  hand  inflation  would  be 
utterly  impolitic  and  unwise  on  the  other.  The 
bottom  difficulty  lies  here — That  in  the  wretchedly 
unsettled  state  of  our  financial  policy  judicious  men 
with  money  are  afraid  to  lend  and  judicious  men  with- 
out money  are  afraid  to  borrow ;  for  an  Act  of  Con- 
gress might  ruin  the  security  of  the  lender  and  over- 
whelm the  enterprise  of  the  borrower.  This  is  indeed 
the  fatal  quality  and  defect  of  paper-money  that  it  is 
the  creature  of  the  legislature  and  that  it  requires  ex- 
traordinary courage  and  vigilance  to  confine  it  within 
legitimate  bounds.  But  he  is  a  slanderer  of  the  people 
and  of  republican  institutions  who  says  that  in 
America  we  lack  the  courage  and  the  virtue  necessary 
to  restrain  our  paper  issues  within  proper  limits.  The 
single  and  overwhelming  want  of  the  hour  is  simply 
A  policy.  Let  Congress  enact  specie-payments  if  that 
be  the  road  to  certainty  and  prosperity ;  or  let  the  people 
be  pledged  that  until  the  National  Debt  is  reduced  to 
$300,000,000  there  shall  be  no  legislation  for  resump- 
tion. Let  us  have  an  end  to  fruitless  and  damaging 
agitation.  If  the  country  could  be  assured  that  for  a 
period  of  ten  years  there  would  be  no  increase  in  the 
volume  of  the  currency  and  no  legally-enforced  de- 


76 


The  Finances. 


crease,  industry  would  throb  with  a  new  and  vigorous 
life;  the  banks  and  the  money-lenders  would  open  their 
coffers  to  the  promotion  of  legitimate  enterprise,  and 
we  should  soon  see  what  is  so  earnestly  to  be  desired 
the  labour  of  the  country  fully  employed  and  the 
remembrance  of  past  needless  sufferings  washed  out 
and  forgotten  in  the  midst  of  present  contentment  and 
prosperity. 


THE  END. 


I 


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